[amp_mcq option1=”3.40%” option2=”13.20%” option3=”7.20%” option4=”30.60%” correct=”option2″]<\/p>\n
The correct answer is B. 13.20%.<\/p>\n
The cost of common stock is the rate of return that shareholders require for investing in the company. It is calculated by adding the risk premium to the risk-free rate of return. The risk premium is the additional return that investors demand for taking on additional risk. The risk-free rate of return is the return that investors can expect to earn on a risk-free investment, such as a government bond.<\/p>\n
In this case, the bond risk premium is 3% and the bond yield is 10.2%. Therefore, the cost of common stock is 10.2% + 3% = 13.2%.<\/p>\n
Option A is incorrect because it is the risk-free rate of return. Option C is incorrect because it is the bond yield. Option D is incorrect because it is much higher than the cost of common stock.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”3.40%” option2=”13.20%” option3=”7.20%” option4=”30.60%” correct=”option2″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-56984","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n