Exhibit 84
Use the Information Below for the Following Problem(S)

question 53

Multiple Choice

Exhibit 8.4
Use the Information Below for the Following Problem(S)
$$\begin{array} { c c c c c } \text { Stack } & \text { Beta } & \text { Current Prica } & \text { Expertad Prica } & \text { Expertad Dividend } \\\hline \mathbf { X } & { [ .8 } & \$ 12.50 & \$ 13.10 & \$ 0.80 \\Y & 1.1 & \$ 2.25 & 9.76 & \$ 0.20 \\Z & 2.1 & \$ 25.70 & \$ 30.04 & \$ 0.00\end{array}$$
-Refer to Exhibit 8.4.If the expected return on the market is 11.5% and the risk-free rate of return is 4.5%,then what are the required rates of return for stocks X,Y,and Z based on the CAPM?
    X    Y      Z

• A) 4.8%  18.3% 16.9%
• B) 7.2%  20.7%  22.3%
• C) 10.7%  17.5%  14.4%
• D) 10.1%  12.2%  19.2%
• E) 11.1%  12.2%  21.3%

---

Definitions:

Gross Profit Rate

A financial ratio that represents the portion of each dollar of revenue that remains after deducting the cost of goods sold, indicating the efficiency of production and pricing.

Equity Method

An accounting technique used by companies to assess the profits earned by their investments in other companies, where the investment gives the investor significant influence over the investee.

Intra-entity Purchases

Buying and selling of goods or services between departments or divisions within the same company.

Gross Profit Rate

The ratio of gross profit to net sales, indicating the efficiency of a company in managing its production and labor costs.