Suppose You Forecast That the Market Index Will Earn a Return

question 19

Multiple Choice

Suppose you forecast that the market index will earn a return of 12% in the coming year.Treasury bills are yielding 4%.The unadjusted β of Mobil stock is 1.30.A reasonable forecast of the return on Mobil stock for the coming year is _________ if you use a common method to derive adjusted betas.

• A)15.0%
• B)15.5%
• C)16.0%
• D)14.6%
• E)none of the above

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Definitions:

Financial Statement Fraud

The intentional misrepresentation or omission of data in a company's financial reports, done to mislead users of those statements.

External Users

Individuals or entities outside of a company who use its financial information, such as creditors, investors, and regulatory agencies, to make decisions.

Accounting Information

Data related to the financial performance and position of a company, including balance sheets, income statements, and cash flow statements.

Financial Analysts

Professionals who evaluate financial data, economic trends, and investment opportunities to provide guidance and advice to businesses and individuals.