Given the Following Data for a Stock: Beta = 0

question 71

Multiple Choice

Given the following data for a stock: beta = 0.5; risk-free rate = 4%; market rate of return
= 12%; and Expected rate of return on the stock = 10%. Then the stock is:

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

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Definitions:

Doctrine

A belief, principle, or body of principles taught or advocated, as by a religious, philosophical, or political group.

Escrow

A legal arrangement in which a third party temporarily holds money, property, or documents until certain conditions are fulfilled.

Real Estate

Property consisting of land or buildings, and the natural resources of the land including uncultivated flora and fauna, farmed crops and livestock, water, and mineral deposits.

Mortgage Debt

The amount of money borrowed to purchase a property, which the borrower is obligated to repay with interest to the lender, typically secured by the property itself.