Home Interior's Stock Has an Expected Return of 13

question 85

Multiple Choice

Home Interior's stock has an expected return of 13.25% and a beta of 1.4. The market return is 10.75% and the risk-free rate is 4.5%. This stock is ________ because the CAPM return for the stock is ________%.

• A)greatly overvalued; 16.50
• B)slightly overvalued; 14.91
• C)priced correctly; 13.25
• D)slightly undervalued; 12.91
• E)greatly undervalued; 16.50

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Definitions:

Sexually Daring

Exhibiting boldness or willingness to take risks in exploring sexual desires and engaging in sexual activities.

Addictive Drugs

Substances that cause dependency and compulsive consumption, often leading to detrimental health effects.

Morphine

A potent opiate analgesic drug derived from the opium poppy used to relieve severe pain.

Narcotic Drugs

Substances that provide pain relief, induce sleep, and can produce states of euphoria, but are potentially addictive.