Utilizing the Security Market Line an Investor Owning a Stock

question 58

Multiple Choice

Utilizing the security market line an investor owning a stock with a beta of -2 would expect the stock's return to ____ in a market that was expected to decline 15 percent.

• A)Rise or fall an indeterminate amount
• B)Fall by 3%
• C)Fall by 30%
• D)Rise by 13%
• E)Rise by 30%

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Definitions:

Stock Dividend

A payment made by a corporation to its shareholders in the form of additional shares, rather than cash.

Uncollectible Receivable

A debt owed to a company that is considered unlikely to be paid by the debtor, classified as a loss.

Working Capital

Current assets minus current liabilities, representing the short-term liquidity and operational efficiency of a business.

Raw Materials

Any materials that go into the final product.