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:

Revenues

The total income generated by a firm or organization from its activities, before any expenses are subtracted.

Utility Function

A mathematical representation of how consumer preferences over a set of goods and services are ordered.

Private Consumptions

Expenditures by individuals and households on goods and services for personal use, excluding investments and savings.

Total Amount

The complete or overall sum of quantities or values.