The Common Stock of PDS Has a Beta of

question 39

Multiple Choice

The common stock of PDS has a beta of .98 and an expected return of 12.34%. The risk-free rate of return is 4.1% and the market rate of return is 11.65%. Which one of the following statements is true
Given this information?

• A) The return on PDS stock will graph below the Security Market Line.
• B) PDS stock is underpriced.
• C) The expected return on PDS stock based on the Capital Asset Pricing Model is 15.52%.
• D) PDS stock has more systematic risk than the overall market.
• E) PDS stock is correctly priced.

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Definitions:

XO Karyotype

A chromosomal configuration characterized by having a single X chromosome and no Y chromosome, typically associated with Turner syndrome.

Turner Syndrome

An inherited condition in which only one sex chromosome (an X chromosome) is present in cells; karyotype is designated X0; affected individuals are sterile females.

Nondisjunction

Abnormal separation of sister chromatids or of homologous chromosomes caused by their failure to disjoin (move apart) properly during mitosis or meiosis.

Sperm

The male reproductive cell, or gamete, in sexually reproducing organisms, designed to fertilize the female ovum.