The Cost of Equity for a Firm Is 20

question 14

Multiple Choice

The cost of equity for a firm is 20%. If the real interest rate is 5%, the inflation premium is 3%, and the market risk premium is 2%, what is the investment risk premium for the firm?

• A)10%
• B)12%
• C)13%
• D)15%

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Definitions:

Legal Positivism

A school of thought in philosophy of law which holds that laws are rules made by human beings and that there is no inherent or necessary connection between law and morality.

Defamation

The act of damaging someone's good reputation through false statements, either spoken (slander) or written (libel).

Civil Law

A legal system that is based on written statutes and codes, as opposed to common law, which is based on judicial decisions and precedent.

Criminal Law

The body of law dealing with actions considered harmful or offensive against the public, society, or the state, subject to punishment such as imprisonment or fines.