Given the Following Data for a Stock: Beta = 1

question 44

Multiple Choice

Given the following data for a stock: beta = 1.5; risk-free rate = 4%; market rate of return
= 12%; and Expected rate of return on the stock = 15%. Then the stock is:

• A) overpriced
• B) under priced
• C) correctly priced
• D) cannot be determined

---

Definitions:

Raw Materials

Basic materials used in the production process that are transformed into finished goods.

Storeroom

A room or space where supplies, materials, or equipment are kept for future use.

Credit

An accounting entry that either increases a liability or equity account, or decreases an asset or expense account. It is positioned on the right side of an accounting ledger.

Predetermined Overhead Rate

A rate calculated before a period begins, used to apply manufacturing overhead costs to products based on a relevant activity, such as machine hours or labor hours.