What Would You Recommend to an Investor Who Is Considering

question 43

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?

• A) Invest; The return is high relative to the risk.
• B) Don't invest; The risk is high relative to the return.
• C) Invest; All stocks revert to the SML over time.
• D)Don't invest; All stocks below the SML are low-growth stocks.

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Definitions:

Growth

An increase in some quantity over time, such as economic growth which refers to an increase in the market value of goods and services produced by an economy.

High Performers

Individuals who consistently exceed standard performance expectations in their roles, contributing significantly to organizational goals.

Stars

In business, it refers to products or business units with high market growth and high market share in a competitive industry.

Growth

Describes the process of increasing in size, value, or importance, typically used in economic and business contexts to refer to the expansion of companies or economies.