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

Question

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Stockholders in a moderately risky firm would expect a return-on-equity higher than the government bond and savings account options, which are 7.0% and 5.0%, respectively. This is because there is a higher risk involved in investing in a company compared to a government bond or insured savings account. Therefore, the answer is above 7.0%.

If Government Bonds Pay 7