Assume the Risk-Free Rate of Return Is 6

question 10

Multiple Choice

Assume the risk-free rate of return is 6.5 percent and the market rate of return is 11.2 percent.Stock A with a beta of 0.88 and an expected return of 9.79 percent; Stock B with a beta of 1.26 and an expected return of 11.36 percent; Stock C with a beta of 1.47 and an expected return of 12.28 percent; Stock D with a beta of 0.79 and an expected return of 10.61 percent.Which one of the following stocks,if any,is correctly priced according to CAPM?

• A)Stock A
• B)Stock B
• C)Stock C
• D)Stock D
• E)None of the stocks are correctly priced according to CAPM.

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Definitions:

Skill Variety

The degree to which a job requires a range of different activities and skills, influencing worker engagement and satisfaction.

Flexible Working Hours

A work arrangement that allows employees to adjust their working times and locations, promoting work-life balance.

Telecommuting

The practice of working remotely, often from home, using digital communication technologies instead of being physically present at a company's office.

Compressed Workweek

An alternative work schedule allowing employees to work longer hours on fewer days, often resulting in a three-day weekend.