Calculate the Required Rate of Return for Everest Expeditions Inc

question 145

Multiple Choice

Calculate the required rate of return for Everest Expeditions Inc., assuming that (1) investors expect a 4.0% rate of inflation in the future, (2) the real risk-free rate is 3.0%, (3) the market risk premium is 5.0%, (4) the firm has a beta of 1.00, and (5) its realized rate of return has averaged 15.0% over the last 5 years.

• A) 10.29%
• B) 10.83%
• C) 11.40%
• D) 12.00%
• E) 12.60%

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Definitions:

Nominal GDP

Refers to the gross domestic product measured at current market prices, without adjusting for inflation.

Technological Change

A change in the methods of production and product innovation that leads to greater efficiency and productivity.

Unemployment

A situation where individuals who are capable of working and are actively seeking employment are unable to find a job.

Incomes

refers to the earnings that individuals or businesses receive, typically through work, investments, or other sources.