The Reward-To-Risk Ratio for Stock X Exceeds That of Stock

question 79

Multiple Choice

The reward-to-risk ratio for Stock X exceeds that of Stock Y. Stock X has a beta of 1.37 and Stock Y has a beta of.98. Given this, you know for certain that:

• A) Stock X is undervalued as compared to Stock Y.
• B) Stock Y is undervalued as compared to Stock X.
• C) Stock X is overvalued and has more risk than stock Y.
• D) Stock X is undervalued and has less risk than stock Y.
• E) Stock X will plot above the security market line and Stock Y will plot below the line.

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Definitions:

Prozac

A brand name for fluoxetine, a widely prescribed antidepressant belonging to the selective serotonin reuptake inhibitor (SSRI) class.

Hopeless

A feeling or state of despair when an individual perceives no possible solutions or outcomes to a difficult situation.

Depressed

Feeling depressed commonly refers to experiencing a persistent feeling of sadness or loss of interest, which can impair daily functioning.

Antianxiety Drug

A medication or substance used to reduce or alleviate symptoms of anxiety.