You Are Considering Purchasing a Stock That Has a Beta

question 99

True/False

You are considering purchasing a stock that has a beta of 1.4.   The risk-free rate is 3% and the market risk premium is 8%.   If the stock is expected to return 12%, then should you purchase the stock?

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Definitions:

Percent Ownership

The proportion of a company's shares owned by an individual or entity, often expressed as a percentage of the total shares outstanding.

Adjusted Book Value

The net worth of a company calculated by adjusting assets and liabilities to their market values rather than their book values.

Stock Issuance

The process by which a company releases its shares to the public or existing shareholders, often to raise capital.

Percent Ownership

The portion of equity interest that an investor holds in a company, often expressed as a percentage.