Stock a Has an Expected Return of 12%, a Beta

question 100

Multiple Choice

Stock A has an expected return of 12%, a beta of 1.2, and a standard deviation of 20%.Stock B also has a beta of 1.2, but its expected return is 10% and its standard deviation is 15%.Portfolio AB has $300,000 invested in Stock A and $100,000 invested in Stock B.The correlation between the two stocks' returns is zero (that is, r_A,B = 0) .Which of the following statements is CORRECT?

• A) The stocks are not in equilibrium based on the CAPM; if A is valued correctly, then B is overvalued.
• B) The stocks are not in equilibrium based on the CAPM; if A is valued correctly, then B is undervalued.
• C) Portfolio AB's expected return is 11.0%.
• D) Portfolio AB's beta is less than 1.2.
• E) Portfolio AB's standard deviation is 17.5%.

Differentiate between output, process, and task controls within organizational settings.

Understand the concepts of centralization, decentralization, and formalization within organizations.

Recognize the importance of policies, rules, and procedures in organizational control.

Differentiate between functional, divisional departmentation, and the role of total quality management in organizations.

---

Definitions:

Congressional Races

Contests for election to the United States Congress, comprising both the House of Representatives and the Senate, with candidates vying to represent specific geographic districts or states.

Abraham Lincoln

The 16th President of the United States who led the country during the Civil War and advocated for the abolition of slavery, ultimately resulting in the Emancipation Proclamation.