Tall Stand Timber stock has an expected return of 8.9%. What is the risk-free rate if the risk premium on the stock is 3.6%?
A)4.70%
B)5.30%
C)5.60%
D)6.50%
E)12.5%

Question

Quizplus · Accepted Answer

The risk-free rate can be determined as:
Expected Return = Risk-Free Rate + Risk Premium
Substituting the values, we get:
8.9% = Risk-Free Rate + 3.6%
Risk-Free Rate = 8.9% - 3.6%
Risk-Free Rate = 5.3% 
Therefore, the answer is B) 5.30%.

Tall Stand Timber Stock Has an Expected Return of 8