If the Expected Rate of Return on a Stock Exceeds

question 8

Multiple Choice

If the expected rate of return on a stock exceeds the required rate, it means that _____

• A)the stock is experiencing an abnormal growth pattern.
• B)the stock should be sold.
• C)the company is not trying to maximize the price per share.
• D)the stock is a good buy.
• E)the dividends are not declared.

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Definitions:

Correlated

Describes the relationship between two variables where changes in one variable are associated with changes in another.

Null Hypothesis

A hypothesis that suggests there is no statistical significance in a set of given observations, implying no effect or relationship.

Linear Relationship

A relationship between two variables where the change in one variable is directly proportional to the change in another variable.

Pearson Correlation

A statistical measure that calculates the strength and direction of a linear relationship between two quantitative variables.