Calculate the Required Rate of Return for Mercury Inc

question 82

Multiple Choice

Calculate the required rate of return for Mercury Inc., assuming that investors expect a 5 percent rate of inflation in the future. The real risk-free rate is equal to 3 percent and the market risk premium is 5 percent. Mercury has a beta of 2.0, and its realized rate of return has averaged 15 percent over the last 5 years.

• A) 15%
• B) 16%
• C) 17%
• D) 18%
• E) 20%

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Definitions:

Monoecious

Describing plants that have both male and female reproductive organs on the same individual, allowing self-pollination.

Haploid Stage

The phase in an organism's life cycle where cells contain only one set of chromosomes, as opposed to diploid stages with two sets.

Diploid Stage

A phase in an organism's life cycle characterized by cells containing two sets of chromosomes, one set inherited from each parent.

Alternation of Generations

A life cycle occurring in plants and some algae, characterized by a regular alternation between two distinct forms, the asexual (sporophyte) and the sexual (gametophyte).