Last Year,ABC Stock Returned 11

question 28

Multiple Choice

Last year,ABC stock returned 11.4 percent,the risk-free rate was 3.2 percent,and the inflation rate was 2.8 percent.What was the risk premium on ABC stock?

• A)8.20 percent
• B)8.43 percent
• C)8.60 percent
• D)8.88 percent
• E)8.97 percent

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Definitions:

Refund Liability

An obligation recorded by a business to return funds to a customer for returned or unsatisfactory goods or services.

Deferred Revenue

Income received in advance for products or services which is recorded as a liability until it is earned.

Sales Returns

Transactions where customers return previously purchased merchandise, leading to a reversal of revenue previously recognized.

Purchase Discount

A reduction in the purchase price, offered by the seller to the buyer, as an incentive for early payment.