Stock a Has a Required Return of 12 Percent

question 17

Multiple Choice

Stock A has a required return of 12 percent. Stock B has a required return of 15 percent. Assume a risk-free rate of 4.75 percent. Which of the following is a correct statement about the two stocks?

• A) Stock A is riskier.
• B) Stock B is riskier.
• C) The stocks have the same risk.
• D) We would need to know if the markets are efficient to answer this question.

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Definitions:

United Nations

An intergovernmental organization established in 1945 to promote international cooperation and to achieve peace and security.

Wartime Manufacturing

The production of military equipment and supplies during periods of war.

American Business

Economic activities and enterprises based in the United States, contributing to its GDP and employment.

Racism

Prejudice, discrimination, or antagonism directed against someone of a different race based on the belief that one's own race is superior.