Which One of the Following Stocks Is Correctly Priced If

question 325

Multiple Choice

Which one of the following stocks is correctly priced if the risk-free rate of return is 4.2% and the market rate of return is 13.6%?

• A) A
• B) B
• C) C
• D) D
• E) E

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Definitions:

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and equipment leases, remaining constant regardless of how much a company produces.

Contribution Margin

The amount by which the sale of a product or service exceeds variable costs, indicating how much it contributes to covering fixed costs.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.

Marginal Costs

The additional cost incurred by producing one more unit of a good or service.