Stock A's Beta Is 2

question 48

Multiple Choice

Stock A's beta is 2.1. The risk-free rate is 6%, and the market return is 13%. The expected rate of return of Stock A is 15.5%. Based on the above information, which of the following statements is true?

• A) An investor should buy Stock A because its expected rate of return is less than the required rate of return.
• B) An investor should buy Stock A because its expected rate of return is more than the required rate of return.
• C) An investor should not buy Stock A because its expected rate of return is more than the required rate of return.
• D) An investor should not buy Stock A because its expected rate of return is less than the required rate of return.
• E) An investor should be indifferent towards buying or selling the stock.

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Definitions:

Regulations Compliance

entails adhering to laws, policies, and regulations that govern how a business operates, ensuring it meets legal and ethical standards.

Measuring Performance

The process of evaluating the efficiency, effectiveness, and quality of work done by an organization, program, or employee.

Supply Function

The role or operation focused on managing and overseeing the procurement and provision of goods and services.

Supply Management

The process of managing and optimizing the flow of materials, information, and finances as products move from suppliers to manufacturers to wholesalers to retailers to consumers.