Stock a Has a Required Return of 19 Percent

question 103

Multiple Choice

Stock A has a required return of 19 percent. Stock B has a required return of 11 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:

Intangible Assets

Assets lacking physical substance, such as patents, trademarks, and goodwill, that are nevertheless valuable to a company.

Kitchen Gadget

A small tool or device that is used in the kitchen for food preparation and cooking tasks.

Land

An asset category representing the ground a company owns, which is not subject to depreciation unlike buildings and equipment.

Survey

A method of gathering information from individuals, typically by asking them a series of questions to obtain data or insights.