The Risk-Free Rate Is 4

question 3

Multiple Choice

The risk-free rate is 4%. The expected market rate of return is 12%. If you expect stock X with a beta of 1.0 to offer a rate of return of 10%, you should

• A) buy stock X because it is overpriced.
• B) sell short stock X because it is overpriced.
• C) sell short stock X because it is underpriced.
• D) buy stock X because it is underpriced.
• E) None of the options, as the stock is fairly priced.

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Definitions:

Crazy Woman Stereoype

A derogatory archetype that portrays women as irrational, overly emotional, or unstable.

Availability Heuristics

A mental scheme that draws on the most immediate exemplars that come to mind for the appraisal of a specific subject, idea, methodology, or decision.

Representativeness Heuristics

A cognitive bias where an individual categorizes a situation based on how similar it is to a typical case from a category.

Language Abilities

The capacity to understand, produce, and use verbal and written communication effectively, a key aspect of human cognition and social interaction.