Linke Motors Has a Beta of 1

question 115

Multiple Choice

Linke Motors has a beta of 1.30,the T-bill rate is 3.00%,and the T-bond rate is 6.5%.The annual return on the stock market during the past 3 years was 15.00%,but investors expect the annual future stock market return to be 10.00%.Based on the SML,what is the firm's required return? Do not round your intermediate calculations.

• A) 11.05%
• B) 13.48%
• C) 12.71%
• D) 10.17%
• E) 10.50%

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Definitions:

Common Stock

A type of equity security that represents ownership in a corporation, giving holders voting rights and a share in the company's profits through dividends.

Register With

To officially record or enroll one's personal details or information with a certain organization, authority, or system.

Board Of Directors

A group of individuals elected by shareholders to oversee the management and strategic direction of a corporation.

Ecological Perspective

A framework considering individuals within their environmental contexts, acknowledging the interaction between people and their surroundings.