The Market Rate of Return Is 12% and the Risk-Free

question 182

True/False

The market rate of return is 12% and the risk-free rate of return is 4%. A stock that has 5% more risk than the market has an actual return of 12%. Given this information, the stock is overpriced.

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Definitions:

Ticker P&G

The stock symbol representing Procter & Gamble Co, used for tracking the performance of its shares in the financial markets.

Quarterly Dividend

A payment made by a corporation to its shareholders, usually as a distribution of profits, every three months.

Annual Dividend

A payment made by a corporation to its shareholders, usually on an annual basis, from its profits.

Preferred Stock

Preferred stockholders received dividends before common stockholders.