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:

Personal Guarantee

A guarantee of payment for another’s obligation.

Closely Held

A closely held company is one whose shares are held by a small group of individuals or entities, often involving family ownership or a small group of investors.

Major Shareholders

Individuals or entities that own a significant proportion of a company's shares, giving them substantial influence.

Fiduciary Duty

A legal obligation of one party to act in the best interest of another when entrusted with particular responsibilities, typically involving financial management or care.