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

Quizplus · Accepted Answer

Stockholders in a moderately risky firm would expect a higher return than the relatively safer options of government bonds or insured savings accounts. The exact amount of return-on-equity is uncertain- it could be above 7.0%. Therefore, option D is the correct answer.

If Government Bonds Pay 7