Assume the risk free interest rate is 3%, the market rate of return is 7% and beta for company X is 2. Given this information, the non-diversifiable risk for this company is a) 8% b) 4% c) 2 d) 6% Referring to question 1, the required rate of return for the company is a) 2% b) 9% c) 8% d) 11% Referring to question 1, this company has a risk that is a) Equal to the market risk b) We cannot tell c) More than the market risk d) Less than the market risk

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter16: Capital Structure Decisions
Section: Chapter Questions
Problem 10MC: Suppose there is a large probability that L will default on its debt. For the purpose of this...
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this is actually one question with three parts, could you answer it please

1. Assume the risk free interest rate is 3%, the market rate of return is 7% and beta for company X
is 2. Given this information, the non-diversifiable risk for this company is
a) 8%
b) 4%
c) 2
d) 6%
2. Referring to question 1, the required rate of return for the company is
a) 2%
b) 9%
c) 8%
d) 11%
3. Referring to question 1, this company has a risk that is
a) Equal to the market risk
b) We cannot tell
c) More than the market risk
d) Less than the market risk
Transcribed Image Text:1. Assume the risk free interest rate is 3%, the market rate of return is 7% and beta for company X is 2. Given this information, the non-diversifiable risk for this company is a) 8% b) 4% c) 2 d) 6% 2. Referring to question 1, the required rate of return for the company is a) 2% b) 9% c) 8% d) 11% 3. Referring to question 1, this company has a risk that is a) Equal to the market risk b) We cannot tell c) More than the market risk d) Less than the market risk
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