Question

If government bonds pay 7.0% interest and insured savings accounts pay 5.0% interest, stockholders in a moderately risky firm would expect return-on-equity values of

Answer 1

If government bonds pay 7.0% interest and insured savings accounts pay 5.0% interest, stockholders in a moderately risky firm would expect return-on-equity values of

A. 5.0%

B. 7.0%

C. 9.0%

D. above 7.0%, but the exact amount is uncertain.

Answer: D

Answer 2

Had to look for the missing options and here is my answer:

The percentage that is expected that the stockholders in a moderately risky firm would be receiving as a return given that the government bonds pay 7.0% interest and an insurance of 5.0% interest for savings account, that would be above 7.0%. But, the exact amount here is not fixed or uncertain. Hope this helps.