You Have Been Asked to Analyze Two Stocks,Stock a and Stock

question 9

Multiple Choice

You have been asked to analyze two stocks,Stock A and Stock B.The beta of stock A is 1.2,and the beta of stock B is 0.8.The expected return on stock A is 13.5%,the expected return on stock B is 11.0% and the risk-free rate is 7%.We also know that stock A is fairly priced.Which of the following regarding Stock B must be true?

• A) The expected return on stock A is too high.
• B) Stock B is also fairly priced.
• C) The price of stock B is too high.
• D) The expected return on stock B is too high.

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Definitions:

Daily Demand

The total quantity of a product or service required by the market within one day.

Computers

Electronic devices that can store, retrieve, and process data, performing calculations and operations according to a set of instructions known as programs.

Probability Distribution

A mathematical description of outcomes in a probabilistic experiment with respect to their probabilities.

Random Sample

A subset of data chosen from a larger set, where each element has an equal probability of being chosen.