What Rate of Return Should an Investor Expect for a Stock

question 46

Multiple Choice

What rate of return should an investor expect for a stock that has a Beta of 0.8 when the market is expected to yield 14% and Treasury bills offer 6%?

• A)9.2%
• B)11.2%
• C)12.4%
• D)12.8% r = r_f + B(r_m - r_f)
• = 6% +.8(14% - 6%)
• = 6% + 6.4%

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Definitions:

Resistance Levels

A price level at which selling is thought to be strong enough to prevent the price from rising further.

Chartists

Analysts who use historical price and volume data to predict future market movements based on patterns and trends, also known as technical analysts.

Technical Analysis

A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume, to identify patterns that can suggest future activity.

Fundamental Analysis

A method of measuring a security's intrinsic value by examining related economic and financial factors.