The Expected Return on JK Stock Is 15

question 52

Multiple Choice

The expected return on JK stock is 15.78 percent while the expected return on the market is 11.34 percent.The stock's beta is 1.51.What is the risk-free rate of return?

• A)2.22 percent
• B)2.31 percent
• C)2.42 percent
• D)2.50 percent
• E)2.63 percent

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Definitions:

Dividends in Arrears

Dividends on preferred shares that have not been paid in the timeframe originally scheduled.

Cumulative Preferred Stock

A type of preferred stock that entitles its holders to receive dividends that were missed in the past, before any dividends can be issued to common stockholders.

Dividend Amount

The sum of money paid by a company to its shareholders out of its profits.

Preferred Stock

A class of ownership in a corporation with a stated dividend that must be paid before dividends to common stockholders.