Based on the Security Market Line,Robo-Tech Stock Has a Required

question 111

Multiple Choice

Based on the security market line,Robo-Tech stock has a required return of 14% and Friendly Insurance Company has a required return of 10%.Robo-Tech has a standard deviation of returns of 18%.Therefore,

• A) Friendly must have a standard deviation of returns of less than 18% because Friendly is less risky than Robo-Tech.
• B) all rational investors will prefer Friendly over Robo-Tech.
• C) for a well-diversified investor, Friendly is less risky than Robo-Tech.
• D) the beta for Friendly must be greater than the beta for Robo-Tech because Friendly is the better buy for a risk-averse investor.

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Definitions:

Adjustment vs. Transcendence

A concept exploring the distinction between adapting to certain conditions or situations (adjustment) versus surpassing or going beyond them (transcendence).

Existential Therapy

A form of psychotherapy that focuses on individual freedom, choice, and responsibility, emphasizing the search for meaning and dealing with existential issues such as mortality.

Alienation

A state of feeling estranged or disconnected from others or oneself, often resulting in feelings of isolation and loneliness.

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A form of psychotherapy that emphasizes personal responsibility and the freedom to shape one's life, focusing on the individual's experience in the present moment.