Given the CAPM's Noted Difficulties, Which of the Following Statements

question 84

Multiple Choice

Given the CAPM's noted difficulties, which of the following statements may be correct concerning a low price-earnings ratio stock?

• A)the stock has too much systematic risk.
• B)the stock plots above the security market line.
• C)the stock plots below the security market line.
• D)the stock has a zero Beta.

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Definitions:

Debt-To-Equity Ratio

A financial benchmark that shows the ratio between debt and shareholders' equity in asset financing.

Prepaying Bonds

The action of repaying the principal of a bond before its maturity date, often as a way to manage debt or save on interest costs.

Outstanding Bonds

Bonds issued by an entity that are currently not redeemed and are in the hands of investors.

Semiannual Interest

Interest that is calculated and paid twice a year on investments or loans.