Suppose the Beta of the Stock of Microsoft, Inc $\beta$ _msft=1

question 6

Multiple Choice

Suppose the beta of the stock of Microsoft, Inc.is $\beta$ _msft=1.45.If r_f=4% and r_M=9%, what is the equilibrium expected return on Microsoft stock, r_msft, according to the CAPM? As an analyst of the firms in the high-technology industry, you expect Microsoft to provide a return of 10% over the next year.Comparing your estimate with equilibrium expected return on Microsoft that you just calculated, would you recommend to your investors that they buy Microsoft stock?

• A)Yes: Microsoft is underpriced
• B)No: Microsoft is overpriced

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Definitions:

Early Diagnosis

The process of detecting a disease or condition at an early stage, allowing for more effective management and treatment outcomes.

Screening Program

is a public health service in which members of a defined population, who do not necessarily perceive they are at risk of a disease or its complications, are asked a question or offered a test, to identify those individuals who are more likely to be helped than harmed by further tests or treatment to reduce the risk of a disease or its complications.

Preclinical Phase

A stage of research that precedes clinical trials, involving laboratory and animal studies to determine a drug's safety and efficacy.

Natural History

The course a disease or condition takes in individual lives from its onset until its resolution or until it progresses to a terminal stage, without intervention.