The required rate of return for a common stock is defined as the:
A)expected return given an assumed set of probabilities and expected cash flows on the stock.
B)maximum expected return based on estimates of expected cashflows from the stock.
C)minimum expected return necessary to induce an investor to purchase the stock.expected return after evaluation of the risk on the stock has been taken.

Question

Quizplus · Accepted Answer

The required rate of return is the minimum expected return necessary to induce an investor to purchase the stock. This rate takes into consideration the risk associated with the investment and is used as a benchmark when evaluating investment opportunities. Option A refers to an expected return calculated based on probabilities and cash flows, while option B refers to the maximum return that can be expected from a stock.

The Required Rate of Return for a Common Stock Is