You Are Considering Investing in One of Three Investments -

question 47

Multiple Choice

You are considering investing in one of three investments - A, B or C.When plotted against the CML, Investment A is below the CML line, Investment B is above the CML line and Investment C is right on the CML line.Which of the following statements is then true?

• A)Investment A is the best investment because it will be underpriced in the market because it has a higher level of risk than the other investments
• B)Investment B is the best investment because it is underpriced since the expected rate of return is less than the required rate of return
• C)Investment C has identical expected and required rates of return so this investment is the most fairly priced
• D)The question cannot be answered with the information given

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Definitions:

Competitive Exclusion

A principle stating that two species competing for the same resources cannot stably coexist if other ecological factors are constant; one will always outcompete the other.

Paramecium

A genus of unicellular ciliates, commonly studied as a representative of the ciliate group.

Niche Theory

A concept in ecology that describes how an organism fits into its environment, including its role in the ecosystem and interactions with other species.

Limiting Resource

A resource in an ecosystem that restricts the growth, abundance, or distribution of organisms or populations due to its scarcity.