If the Line Measuring a Stock's Historic Returns Against the Market's

question 20

Multiple Choice

If the line measuring a stock's historic returns against the market's historic returns has a slope greater than 1.0, then the:

• A) stock is currently underpriced.
• B) market risk premium is increasing.
• C) stock has a significant amount of unique risk.
• D)stock has a beta exceeding 1.0.

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Definitions:

Debit

An accounting entry that results in either an increase in assets or a decrease in liabilities on a company's balance sheet.

Credit

An accounting entry that increases a liability or equity account, or decreases an asset or expense account.

Accounts Payable

Accounts payable are amounts owed by a company to its creditors for goods or services that have been delivered or used but not yet paid for.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting liabilities, representing owners' claims on the company's assets.