The Risk Free Rate of Return Is 2

question 25

Multiple Choice

The risk free rate of return is 2.5% and the market risk premium is 8%.Penn Trucking has a beta of 2.2 and a standard deviation of returns of 28%.Penn Trucking's marginal tax rate is 35%.Analysts expect Penn Trucking's dividends to grow by 6% per year for the foreseeable future.Using the capital asset pricing model,what is Penn Trucking's cost of retained earnings?

• A) 16.4%
• B) 17.7%
• C) 19.6%
• D) 20.1%

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Definitions:

Natural Causes

Factors or events occurring in nature that can lead to changes or impacts in the environment or human activities without human intervention.

Process Average

The mean value of a series of process measurements, indicating the central tendency of process performance.

Process Range

The difference between the maximum and minimum values in a set of data, reflecting the variability in a process.

Assignable Cause

A specific, identifiable source of variation in a process, distinct from random variation and often indicating a need for corrective action.