A Friend Has Some Reliable Information That the Stock of Puddles

question 93

Multiple Choice

A friend has some reliable information that the stock of Puddles Company is going to rise from $43.00 to $50.00 per share over the next year.You know that the annual return on the S&P 500 has been 11% and the 90-day T-bill rate has been yielding 5% per year over the past 10 years.If beta for Puddles is 1.5,will you purchase the stock?

• A) Yes, because it is overvalued.
• B) Yes, because it is undervalued.
• C) No, because it is undervalued.
• D) No, because it is overvalued.
• E) Yes, because the expected return equals the estimated return.

---

Definitions:

Future Contact

Future contact refers to the anticipated or planned communication or interaction between individuals or groups in the coming time.

Fear Rejection

The apprehension or anxiety about being rejected by others, which can affect social interactions and individual behavior.

Extraverted University Freshman

Refers to a first-year college student characterized by an outgoing, socially confident personality.

Dormitory

A residence hall providing sleeping and living quarters for large numbers of people, especially students in a college or university.