Question
Finch Incs preferred stock pays a dividend of $5 every six months. If the price of the stock is $50.00, what is its nominal (not
Finch Incs preferred stock pays a dividend of $5 every six months. If the price of the stock is $50.00, what is its nominal (not effective) annual rate of return?
25% | ||
10% | ||
5.00% | ||
20% |
Assume that investors have recently become more risk averse, so the market risk premium has increased. Also, assume that the risk-free rate and expected inflation have not changed. Which of the following is most likely to occur?
The required rate of return for a stock with a beta of 1 will increase. | ||
The required rate of return for a stock with a beta of 1 will decrease. | ||
The required rate of return for a stock with a beta of 1 will remain unchanged. | ||
The required rate of return for a stock with a beta of 1 can decrease, increase or remain unchanged depending on the investor's preferences. |
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