The return that is expected by investors from a common stock is also called its market capitalization rate, or cost of equity capital.Group of answer choicesFalseTrue

The return that can be earned on investment opportunities available to investors in financial markets is called the _________________ cost of capital.Multiple choice question.marketcomparisonopportunitysunk

One can estimate the expected rate of return or the cost of equity capital as follows:Group of answer choices(dividend yield) × (expected rate of growth in dividends).dividend yield + expected rate of growth in dividends.dividend yield − expected rate of growth in dividends.dividend yield ÷ expected rate of growth in dividends.

The cost of capital is the same as the cost of equity for firms that are financed:Group of answer choicesentirely by debt.entirely by equity.by 50 percent equity and 50 percent debt.by both debt and equity.

For example, if you have a portfolio that is made up of 50% stocks and 50% bonds, and the expected return on stocks is 10%, and the expected return on bonds is 5%, then your expected return would be calculated as:

The market price of common stock is based on investors’ expectations about future earnings. This statement is