The DMT Company Is Financed Entirely with Equity

question 26

Multiple Choice

The DMT Company is financed entirely with equity. DMT has a beta of 1.20 and the current risk-free rate is 9.5 percent. If the expected market return is 14 percent, what rate of return should DMT require on a project of average risk?

• A) 14.9%
• B) 15.4%
• C) 14.0%
• D) 12.0%

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Definitions:

T-score

is a type of standardized score that indicates how many standard deviations an individual's score is from the mean of a norm group.

Percentile

A percentile is a statistical measure indicating the value below which a given percentage of observations in a group of observations falls.

Mode

A measure of central tendency that represents the score with the greatest frequency in a distribution.

Group of Data

A group of data refers to a collection of related data points or information that are often analyzed together to identify patterns, trends, or insights.