Given the Following Information, Determine the Risk-Free Rate

question 14

Multiple Choice

Given the following information, determine the risk-free rate. Cost of equity = 12%
Beta = 1.50
Market risk premium = 6%

• A) 6.0%
• B) 3.0%
• C) 9.0%
• D) 6.5%

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Definitions:

Par Value

The face value of a bond or stock as stated by the issuer, which does not necessarily reflect its market value.

Redemption Value

The amount that an investment instrument, such as a bond, is worth at its maturity or when it is redeemed.

Stated Value

Arbitrary value placed by the board of directors on each share of no-par stock to fulfill legal capital requirements.

Total Assets

The sum of all assets, both current and noncurrent, owned by a company, representing the resources it has at its disposal.