The Common Stock of Modern Interiors Has a Beta of 1.61

question 96

Multiple Choice

The common stock of Modern Interiors has a beta of 1.61 and a standard deviation of 27.4 percent. The market rate of return is 13.2 percent and the risk-free rate is 4.8 percent. What is the cost of equity for this firm?

• A) 18.32 percent
• B) 19.97 percent
• C) 21.08 percent
• D) 24.40 percent
• E) 26.05 percent

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Definitions:

IQ

IQ, or Intelligence Quotient, is a measure of a person's reasoning ability compared to the statistical norm or average for their age, taken as 100.

Heritability Estimate

A statistical measure that indicates how much of the variation in a particular trait within a population can be attributed to genetic differences among individuals.

Intelligence

The aptitude for acquiring knowledge, grasping concepts, tackling issues, and adapting to unfamiliar scenarios.

Correlation

An indicator that measures the extent of co-fluctuation among two or more variables.