USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 122

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You expect the risk-free rate (RFR) to be 3 percent and the market return to be 8 percent. You also have the following information about three stocks.

-Refer to Exhibit 7.2. What are the expected (required) rates of return for the three stocks (in the order X, Y, Z) ?

• A) 16.50 percent, 5.50 percent, 22.00 percent
• B) 9.25 percent, 10.5 percent, 7.5 percent
• C) 21.25 percent, 8.33 percent, 11.43 percent
• D) 6.20 percent, 2.20 percent, 8.20 percent
• E) 15.00 percent, 3.50 percent, 7.30 percent

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Definitions:

Economic Profits

The difference between a firm's total revenue and its total expenses, including both explicit and implicit costs.

Product Price

The amount of money required to purchase a specific product or service.

Production Capacity

The maximum output that a business can produce in a given period under normal conditions.

Consumers' Desire

The inclination or preference of consumers towards certain goods, services, or experiences.