A1 X V fx A B C D E F G H C - K UNDERSTANDING HEALTHCARE FINANCIAL MANAGEMENT Chapter 5 - Financial Risk and Required Return PROBLEM 10 HMA, Universal, and the market have had the following returns over the past four years: 8 Year Market HMA Universal 9 11% 10% 12% 10 7% 4% -3% 11 17% 12% 21% 12 4 -3% -2% -5% 13 14 The risk-free rate is 7 percent. The market risk premium is 5 percent. The expected rate of 15 return on both stocks is 12 percent. Which stock would you purchase? 16 17 ANSWER 18 19