The Saguenay Tourism Company has a beta of 1.30, the risk-free rate is 3%, and the return on the market is 4%.The required return on the firm's equity is:

Question

Quizplus · Accepted Answer

The correct answer is C because the required return on the firm's equity is equal to the risk-free rate plus the beta of the firm multiplied by the difference between the return on the market and the risk-free rate. In this case, the required return on the firm's equity is equal to 3% + 1.30 * (4% - 3%) = 4.30%.

The Saguenay Tourism Company Has a Beta of 1