Based on Your Analysis, You Believe That Alpha Stock Which

question 84

Multiple Choice

Based on your analysis, you believe that Alpha stock which has a beta of 1.32 is going to yield 14.05% this coming year. The market is expected to yield 11.4% and T-bills are yielding 3.8%. According to CAPM, which one of these statements is correct given this information?

• A) The stock is currently underpriced.
• B) The stock plots below the security market line.
• C) The risk premium on the stock is too low given the stock's beta.
• D)The stock plots to the left of the market on a security market line graph.

---

Definitions:

Wrongful Interference

Illegal or improper intervention in the business relationships or contracts of others, causing harm or loss.

Business Relationship

A connection between individuals or entities involved in business activities, focusing on commercial transactions, partnerships, or agreements.

Illegal Interference

Unauthorized or unlawful meddling or involvement in the affairs or property of others, often resulting in harm or damage.

Diminishing Returns

A rephrased definition: The principle stating that successive increases in inputs for production result in gradually decreasing increments in output.