Exhibit 82
Use the Information Below for the Following Problem(S)
You

question 115

Multiple Choice

Exhibit 8.2
Use the Information Below for the Following Problem(S)
You expect the risk-free rate (RFR) to be 3 percent and the market return to be 8 percent. You also have the following information about three stocks.
$$\begin{array} { c c c c c } \text { Stack } & \text { Eeta } & \begin{array} { c } \text { Current } \\\text { Price }\end{array} & \begin{array} { c } \text { Expected } \\\text { Price }\end{array} & \begin{array} { c } \text { Experted } \\\text { Dividend }\end{array} \\\hline \mathbf { X } & 1.25 & \$ 20 & \$ 23 & \$ 1.25 \\\mathbf { Y } & 1.50 & \$ 27 & \$ 29 & \$ 0.25 \\\mathbf { Z } & 0.90 & \$ 35 & \$ 38 & \$ 1.00\end{array}$$
-Refer to Exhibit 8.2.What are the expected (required) rates of return for the three stocks (in the order X,Y,Z) ?

• A) 16.50%, 5.50%, 22.00%
• B) 9.25%, 10.5%, 7.5%
• C) 21.25%, 8.33%, 11.43%
• D) 6.20%, 2.20%, 8.20%
• E) 15.00%, 3.50%, 7.30%

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Definitions:

Financial Assets

Economic resources or ownership rights that are intangible and represent a claim to future payments, such as stocks, bonds, or bank deposits.

Aggregate Supply Curve

A graph showing the relationship between the total quantity of goods and services that producers are willing to supply at different price levels.

Cyclical Unemployment

Unemployment that results from business cycle fluctuations in the economy, typically increasing during recessions and decreasing during expansions.

Idle Capacity

The portion of a business's resources that is not being utilized to its full potential in production or service delivery.