Katie owns 100 shares of ABC stock.Which one of the following terms is used to refer to the return that Katie and the other shareholders require on their investment in ABC?

Question

Quizplus · Accepted Answer

The return that Katie and the other shareholders require on their investment in ABC is referred to as the cost of equity. This is the amount of return that shareholders expect to receive for their ownership in the company. It is often calculated using the capital asset pricing model (CAPM) and takes into account the risk-free rate, the market risk premium, and the stock's beta. The return that Katie and other shareholders require on their investment in ABC is referred to as the cost of equity. This represents the minimum return that investors expect to receive in order to compensate for the risks they are taking on by investing in the company's stock. The other options (A, B, D, and E) are not applicable in this context.

Katie Owns 100 Shares of ABC Stock