Use the Information for the Question(s)below

question 88

Multiple Choice

Use the information for the question(s) below.
Suppose that in the coming year,you expect Exxon-Mobil stock to have a volatility of 42% and a beta of 0.9,and Merck's stock to have a volatility of 24% and a beta of 1.1.The risk-free interest rate is 4% and the market's expected return is 12%.
-The cost of capital for a project with the same beta as Exxon Mobil's stock is closest to:

• A)11.6%.
• B)11.2%.
• C)12.8%.
• D)7.6%.

---

Definitions:

Wilcoxon Rank-sum Test

A nonparametric statistical test used to compare two independent samples to determine if they come from the same population or not, based on rank sums.

Wilcoxon Rank Sum Test

A non-parametric statistical test used to compare two independent samples to assess whether their populations have identical distribution.

Sign Test

A non-parametric statistical test used to assess the difference between matched pairs of samples when the specific data measurement scale does not meet the requirements for parametric testing.

Binomial Tables

Pre-calculated tables used to find the probability of observing a certain number of successes in a fixed number of binary experiments.