Your Opinion Is That CSCO Has an Expected Rate of Return

question 80

Multiple Choice

Your opinion is that CSCO has an expected rate of return of 0.13. It has a beta of 1.3. The risk-free rate is 0.04 and the market expected rate of return is 0.115. According to the Capital Asset Pricing Model, this security is

• A) underpriced.
• B) overpriced.
• C) fairly priced.
• D) Cannot be determined from data provided.

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Definitions:

Efficient

Achieving maximum productivity with minimum wasted effort or expense; effectively utilizing resources.

Equitable

Fair and impartial treatment or distribution, often in the context of socio-economic policies.

Excess Supply

When the quantity supplied of a good exceeds the quantity demanded.

Excess Demand

When the quantity demanded of a good exceeds the quantity supplied.