Wilson Farms' Stock Has a Beta of

question 86

Multiple Choice

Wilson Farms' stock has a beta of .73 and an expected return of 9.0%. The risk-free rate is 1.9% and the market risk premium is 7.3%. This stock is ________ because the CAPM return for the stock is ________%.

• A)undervalued; 7.23
• B)undervalued; 7.53
• C)undervalued; 7.46
• D)overvalued; 7.23
• E)overvalued; 7.53

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Definitions:

Restructuring

A reorganization of a problem that can facilitate its solution; a characteristic of creative thought.

Reorganizing

The process of arranging or structuring something again or differently, often to improve efficiency or clarity.

Problem

A situation, question, or matter that needs to be solved or resolved through thought, discussion, or action.

Analogy

A cognitive process of transferring information or meaning from a particular subject (the analogue or source) to another (the target), also a linguistic expression corresponding to such a process.