The Equity of Martin Industries Has a Beta of 1

question 62

Multiple Choice

The equity of Martin Industries has a beta of 1.43.The risk-free rate of return is 3.6% and the market risk premium is 9%.What is the expected rate of return on Martin Industries share?

• A)11.3%
• B)14.1%
• C)16.5%
• D)17.4%
• E)18.0%

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Definitions:

Common Stock Option Warrants

Rights issued to investors to purchase stock at a specified price before a certain date, often used as an investment incentive.

Stock Option Plan

A compensation strategy used by companies to grant employees the option to purchase company shares at a predetermined price.

Compensation Expense

The total cost incurred by an employer to compensate its employees, including wages, benefits, bonuses, and any other form of payment for services rendered.

Fair Value

An estimate of the market value of an asset or liability, based on current conditions and mutually knowledgeable, willing parties' transactions.