Given Are the Following Two Stocks a and B

question 76

Multiple Choice

Given are the following two stocks A and B: If the expected market rate of return is 0.09 and the risk-free rate is 0.05, which security would be considered the better buy and why

• A)A because it offers an expected excess return of 1.2%.
• B)B because it offers an expected excess return of 1.8%.
• C)A because it offers an expected excess return of 2.2%.
• D)B because it offers an expected return of 14%.
• E)B because it has a higher beta.

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Definitions:

Mercury

A chemical element with symbol Hg and atomic number 80, known for being a liquid metal at room temperature and for its toxicity.

Room Temperature

The ambient temperature of a room, generally considered to be between 20 to 25 degrees Celsius (68 to 77 degrees Fahrenheit).

Sodium Sulfate

An inorganic salt used in detergents, paper manufacturing, and glass production, known chemically as Na2SO4.

Atoms

Atoms are the basic units of matter and the defining structure of elements, consisting of a nucleus surrounded by electrons, and classified by the number of protons they contain.