Assume the Risk-Free Rate Is 4

question 55

Multiple Choice

Assume the risk-free rate is 4.5% and the expected return on the market is 11%.You anticipate Stock XYZ to sell for $28 at the end of next year and pay a dividend of $2.The stock is currently selling for $26.50 with a beta of 1.2.You currently hold stock XYZ in a well-diversified portfolio.Assuming you have money to invest,you should:

• A) Buy stock XYZ.
• B) Sell stock XYZ.
• C) Do nothing because it is properly valued.
• D) Invest your money in the risk-free rate of return.
• E) Both b and d above.

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Definitions:

Social Learning

A type of learning in which people are more likely to imitate behaviors if they have seen others rewarded for performing them, and less likely to imitate behaviors if they have seen others punished for performing them.

Bad Dog

A colloquial expression often used to describe a dog's undesirable behavior.

Social Learning

A theory that explains how people learn new behaviors, attitudes, and skills by observing the actions of others.

Instrumental Learning

Learning based on the consequences of behavior, often described through the law of effect, where behaviors followed by favorable outcomes are more likely to recur.