A Friend Has Information That the Stock of Zip Incorporated

question 49

Multiple Choice

A friend has information that the stock of Zip Incorporated is going to rise from $62.00 to $65.00 per share over the next year.You know that the annual return on the S&P 500 has been 10% and the 90-day T-bill rate has been yielding 6% per year over the past 10 years.If beta for Zip is 0.9,will you purchase the stock?

• A) Yes, because it is overvalued.
• B) Yes, because it is undervalued.
• C) No, because it is undervalued.
• D) No, because it is overvalued.
• E) Yes, because the expected return equals the estimated return.

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Definitions:

Deficient Product Performance

Circumstances where a product fails to meet expected standards, functionality, or quality benchmarks.

Sale of Goods Act

Legislation governing the sale of goods, which includes provisions on the rights of buyers and sellers.

Consumer Purchases

Transactions involving the acquisition of goods or services by individuals for personal, family, or household use.

Consumer Protection Laws

Laws designed to ensure fair trade competition and the free flow of truthful information in the marketplace, protecting consumers from fraud and deception.