Determine the Expected Return of a Company's Stock Given a Risk

question 34

Multiple Choice

Determine the expected return of a company's stock given a risk free rate of 7%, an expected market return of 12%, a market risk premium of 5% and a company Beta of 1.5.

• A)115
• B)125
• C)135
• D)145

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Definitions:

Scenario Analysis

A process of analyzing possible future events by considering alternative possible outcomes or scenarios.

Strategic Planning

Strategic planning involves determining the course an organization will take and deciding how to allocate resources, such as money and personnel, to follow that path.

Forecasting

the process of making predictions about future events based on historical and current data.

Retirement Account

A financial arrangement designed to replace employment income upon retirement, often offering tax benefits.