Question

1.

The Up and Coming Corporation's common stock has a beta of 1.5. If the risk-free rate is 3 percent and the expected return on the market is 11 percent, what is the company's cost of equity capital? (Do not round your intermediate calculations.)

rev: 09_20_2012

15.75%

14.25%

15.6%

19.5%

15%

2.

Last year, you purchased a stock at a price of $60.00 a share. Over the course of the year, you received $1.60 in dividends and inflation averaged 2.1 percent. Today, you sold your shares for $64.50 a share. What is your approximate real rate of return on this investment?

9.6 percent

10.2 percent

5.4 percent

12.3 percent

8.1 percent

Answer 1