The Risk-Free Rate Is 4

question 38

Multiple Choice

The risk-free rate is 4%.The expected market rate of return is 11%.If you expect stock X with a beta of .8 to offer a rate of return of 12 percent,then you should _________.

• A) buy stock X because it is overpriced
• B) buy stock X because it is underpriced
• C) sell short stock X because it is overpriced
• D) sell short stock X because it is underpriced

---

Definitions:

Performance Appraisal System

A formal process by which an employee's job performance is assessed, typically involving evaluation against predefined objectives and providing feedback for development.

Reliable

The quality of being consistently good in performance, accuracy, or dependability.

Valid

Legally or logically sound; having legitimacy or credibility, typically applied to arguments, conclusions, or documents.

Effective Performance

The level at which an individual or organization successfully meets or exceeds established goals or standards in their work.