CCC Corp Has a Beta of 1

question 115

Multiple Choice

CCC Corp has a beta of 1.5 and is currently in equilibrium.The required rate of return on the stock is 12.00% versus a required return on an average stock of 10.00%.Now the required return on an average stock increases by 37.5% (not percentage points) .Neither betas nor the risk-free rate change.What would CCC's new required return be? Do not round your intermediate calculations.

• A) 19.92%
• B) 17.10%
• C) 17.45%
• D) 17.63%
• E) 20.09%

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Definitions:

Error

The difference between the observed value and the true value due to measurement or estimation inaccuracies.

Multiple Regression Analysis

A method in statistics that employs multiple predictor variables to estimate the result of a dependent variable.

SSE

Sum of Squared Errors, a measure of the discrepancy between the data and an estimation model, indicating the total deviation of data points from the fitted values.

Estimated Income

An approximation of the amount of money expected to be earned over a specific period.