What Would You Recommend to an Investor Who Is Considering

question 53

Multiple Choice

What would you recommend to an investor who is considering an investment that, according to its Beta, plots below the security market line (SML) ?

• A)Invest; return is high relative to risk
• B)Don't invest; risk is high relative to return
• C)Invest; stocks revert to the SML over time
• D)Don't invest; stocks below the SML have too much unique risk

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Definitions:

Paying For Performance

A compensation strategy that rewards employees based on their job performance, often with bonuses or other incentives.

Good Performance

The act of achieving or exceeding the set standards of tasks or goals in a workplace or educational setting.

Performance Measures

Quantitative or qualitative indicators used to evaluate and track the efficiency, productivity, or success of an individual, team, or organization's outputs.

Deficient

Lacking in some necessary quality or element; insufficient or inadequate.