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:

Monthly

Pertaining to or occurring every month, often used in the context of reporting, billing, or accounting periods.

Dollar Sales

The total revenue a company generates from sales, measured in dollars, over a specific period.

Margin of Safety

The difference between actual or expected sales and the break-even point, indicating the amount by which sales can drop before a company incurs losses.

Break-Even Sales

The amount of revenue required to cover total fixed and variable expenses during a specific period, resulting in no profit or loss.