Financial Management - Study Mode

[#771] If stock has a great risk related to it than a required return is
Correct Answer

(A) higher

Explanation

Solution: If stock has a great risk related to it than a required return is higher.

[#772] An amount invested is Rs 2000 and return is Rs 200 then rate of return would be
Correct Answer

(B) 10.00%

Explanation

Solution: Rate of return = Return / Amount invested = 200 / 2000 = 10.00%

[#773] Type of cost which is used to raise common equity by reinvesting internal earnings is classified as
Correct Answer

(B) cost of common equity

Explanation

Solution: Type of cost which is used to raise common equity by reinvesting internal earnings is classified as cost of common equity. The cost of equity refers to two separate concepts depending on the party involved. If you are the investor, the cost of equity is the rate of return required on an investment in equity.

[#774] If future return on common stock is 19% and rate on T-bonds is 11% then current market risk premium will be
Correct Answer

(C) 8.00%

Explanation

Solution: Current market risk premium = Return on common stock - Rate on T-bonds = 19% - 11% = 8%.

[#775] Historical growth rates, analysis forecasts and retention growth model are approaches to estimate
Correct Answer

(B) growth rate

Explanation

Solution: Historical growth rates, analysis forecasts and retention growth model are approaches to estimate growth rate. The term “historical growth” refers to the annualized rate at which a company has grown its earnings per share over a given period of time.