You Believe That Alpha Stock Which Has a Beta of 1.32

question 73

Multiple Choice

You believe that Alpha stock which has a beta of 1.32 will return 16.0% this coming year.The market is expected to return 11.4% and T-bills return 3.8%.According to CAPM,which one of these statements is correct given this information?

• A) The stock is currently underpriced.
• B) The stock plots below the security market line.
• C) The risk premium on the stock is too low given the stock's beta.
• D) The stock plots to the left of the market on a security market line graph.

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