PDQ Stock Has a Required Return of 20

question 29

Multiple Choice

PDQ stock has a required return of 20%. The expected market return is 15% and the risk-free rate is 5%. Calculate the beta of PDQ stock.

• A)1
• B)1.5
• C)2
• D)2.5
• E)3

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Definitions:

Present Value

The present value of a future amount of money or series of cash flows, calculated using a given interest rate.

Minimum Lease Payments

The lowest amount that a lessee is expected to pay over the lease term for the right to use an asset.

Current Ratio

The current ratio is a liquidity metric that evaluates a company's ability to pay off its short-term liabilities with its short-term assets.

Capital Lease

A lease agreement in which the lessee records the leased asset as if it were purchased.