Security a Has an Expected Rate of Return of 0

question 39

Multiple Choice

Security A has an expected rate of return of 0.10 and a beta of 1.3.The market expected rate of return is 0.10 and the risk-free rate is 0.04.The alpha of the stock is

• A)1.7%.
• B)-1.8%.
• C)8.3%.
• D)5.5%.
• E)none of the above.

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Definitions:

Competitive Advantage

An attribute or ability that allows an organization to outperform its competitors, often leading to greater sales or margins.

Inertia

A tendency to do nothing or remain unchanged, often leading to stagnation.

Marketplace

A venue where buyers and sellers interact to exchange goods, services, or information.

Generic Competitive Strategies

Broad approaches to competitive advantage that companies can apply across industries, often categorized into cost leadership, differentiation, and focus strategies.