If government bonds pay 8.5% interest and CDIC insured savings accounts pay 5.5% interest,shareholders in a moderately risky firm would expect return-on-equity values of:

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Shareholders in a moderately risky firm would expect a return on equity that is greater than the interest rate on a CDIC insured savings account (5.5%) and government bonds (8.5%). However, the exact amount of the return on equity is uncertain and will depend on various factors such as the firm's performance, industry conditions, and economic environment.

If Government Bonds Pay 8