Oak Enterprises Has a Beta of 1

question 56

Multiple Choice

Oak Enterprises has a beta of 1.2, the market return is 8%, and the T-bill rate is 4%. What is their expected required return of common equity?

• A)Between 11% and 12%
• B)Between 8% and 9%
• C)Between 7% and 8%
• D)Between 4% and 5%

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Definitions:

Security Interest

A creditor’s right to use collateral to recover a debt.

Security Agreement

A written agreement that creates a security interest.

Purchase Money Security Interest (PMSI)

A special type of security interest that allows creditors to obtain priority in a debtor's collateral, provided the credit was used to purchase the collateral.

Perfected

The state of a security interest when the secured party has done everything that the law requires to give the secured party greater rights to the goods than others have.