Wilson Farms' Stock Has a Beta of

question 40

Multiple Choice

Wilson Farms' stock has a beta of .84 and an expected return of 7.8 percent.The risk-free rate is 2.6 percent and the market risk premium is 6 percent.This stock is ________ because the CAPM return for the stock is ________ percent.

• A) undervalued; 7.34
• B) undervalued; 7.49
• C) undervalued; 7.64
• D) overvalued; 7.34
• E) overvalued; 7.49

---

Definitions:

Weapons Effect

The mere presence of a weapon increases the probability that it will be used aggressively.

Aggression-likelihood Model

A theoretical model proposing how certain factors increase or decrease the likelihood that individuals will behave aggressively in given situations.

Neo-associationist Analysis

A psychological theory suggesting that emotions and behavior are the result of complex associations formed through experiences.

Excitation-transfer Model

A psychological theory suggesting that arousal caused by one stimulus can be transferred and add to the arousal elicited by a second stimulus, intensifying the overall emotional experience.