Exhibit 7-2
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 15

Multiple Choice

Exhibit 7-2
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
You expect the risk-free rate (RFR) to be 3% and the market return to be 8%. You also have the following information about three stocks. $$\begin{array} { c c c c c } \text { STOCK } & \text { BETA } & \begin{array} { c } \text { CURRENT } \\\text { PRICE }\end{array} & \begin{array} { c } \text { EXPECTED } \\\text { PRICE }\end{array} & \begin{array} { c } \text { EXIPECTED } \\\text { DIVIDEND }\end{array} \\\hline \mathbf { X } & 1.25 & \$ 20 & \$ 23 & \$ 1.25 \\\mathbf { Y } & 1.50 & \$ 27 & \$ 29 & \$ 3.25 \\\mathbf { Z } & 0.90 & \$ 35 & \$ 38 & \$ 1.00\end{array}$$
-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%, 5.50%, 22.00%
• B) 9.25%, 10.5%, 7.5%
• C) 21.25%, 8.33%, 11.43%
• D) 6.20%, 2.20%, 8.20%
• E) 15.00%, 3.50%, 7.30%

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Definitions:

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Legally binding agreements between two or more parties that are enforceable by law, typically involving the exchange of goods, services, money, or promises.

Capitalist Rhetoric

Discourse that advocates for or supports the capitalist economic system, emphasizing the importance of free markets, private ownership, and profit.

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Popular culture refers to the set of ideas, perspectives, attitudes, images, and other phenomena that are within the mainstream of a culture, especially Western culture during the late 20th and early 21st centuries.

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The ability or capacity of a nation's armed forces to use force, especially as a means of defense or warfare.