Stock a Has a Required Return of 19 Percent

question 103

Multiple Choice

Stock A has a required return of 19 percent. Stock B has a required return of 11 percent. Assume a risk-free rate of 4.75 percent. Which of the following is a correct statement about the two stocks?

• A) Stock A is riskier.
• B) Stock B is riskier.
• C) The stocks have the same risk.
• D) We would need to know if the markets are efficient to answer this question.

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Definitions:

Groupthink

A phenomenon in which the desire for harmony or conformity in the group results in an irrational or dysfunctional decision-making outcome.

Task Orientation

A focus on completing assigned tasks or achieving specific goals, often used to describe work ethics or learning strategies.

Relationship Orientation

An individual's tendency to prioritize and value interpersonal relationships in various contexts.

Wait-And-See

An approach or strategy where action is postponed in favor of observing developments or outcomes before making a decision.