A Stock with an Actual Return That Lies Above the Security

question 14

Multiple Choice

A stock with an actual return that lies above the security market line:

• A) has more systematic risk than the overall market.
• B) has more risk than warranted based on the realized rate of return.
• C) has yielded a higher return than expected for the level of risk assumed.
• D) has less systematic risk than the overall market.
• E) has yielded a return equivalent to the level of risk assumed.

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Definitions:

Precausal Reasoning

A type of logic in young children characterized by a misunderstanding of cause and effect relationships.

Egocentrism

In Piaget’s terms, the tendency to “center on oneself”—that is, to consider the world entirely in terms of one’s own point of view.

Centered On Oneself

Focused primarily on one's own needs, desires, or emotions, often to the exclusion of others.

Egocentrism

A cognitive bias in young children, and sometimes adults, where one has difficulty understanding or acknowledging perspectives other than one's own.