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:

Anticonvulsant Medication

Drugs used to prevent or reduce the frequency of convulsions in various types of epilepsy and other conditions.

Rapid Cycles

In the context of bipolar disorder, experiencing four or more episodes of mania, hypomania, or depression within a year.

Hyperactivity

Excessive movement and activity which may be manifested by symptoms like fidgeting or talkativeness, often associated with ADHD.

Caloric Intake

The total number of calories consumed through eating and drinking, which is crucial for energy balance and nutritional health.