The Risk-Free Rate of Interest Is 4% and the Market

question 125

Multiple Choice

The risk-free rate of interest is 4% and the market risk premium is 9%.Howard Corporation has a beta of 2.0,and last year generated a return of 16% with a standard deviation of returns of 27%.The required return on Howard Corporation stock is

• A) 36%.
• B) 34%.
• C) 26%.
• D) 22%.

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Definitions:

Marginal Value Curve

A graph that shows the additional value or utility gained from consuming one more unit of a good or service.

Expenditure Curves

Graphical representations that show how changes in income affect spending.

Monopsonist

A market condition where there is only one buyer for many suppliers, giving the buyer significant control over the market.

Input Units

The basic quantities or resources used in the production of goods and services.