The Expected Return on the Market Portfolio Is 15

question 34

Multiple Choice

The expected return on the market portfolio is 15%. The risk-free rate is 8%. The expected return on SDA Corp. common shares is 16%. The beta of SDA Corp. common shares is 1.25. Within the context of the capital asset pricing model, ________.

• A)SDA Corp. shares are underpriced
• B)SDA Corp. shares are fairly priced
• C)SDA Corp. shares' alpha is -0.75%
• D)SDA Corp. shares' alpha is 0.75%

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