Your Opinion Is That Security a Has an Expected Rate

question 4

Multiple Choice

Your opinion is that security A has an expected rate of return of 0.145. It has a beta of 1.5. The risk-free rate is 0.04, and the market expected rate of return is 0.11. According to the Capital Asset Pricing Model, this security
Is

• A) underpriced.
• B) overpriced.
• C) fairly priced.
• D) Cannot be determined from data provided.

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Definitions:

Behavioral Trends

Patterns or tendencies in behavior that are observable across a group of individuals or over time.

Inconsistent

Displaying a lack of regularity or predictability in actions, thoughts, or outcomes, leading to variability in behavior or results.

Person-Situation Debate

A discussion in psychology regarding the relative influence of personality traits versus situational factors in determining individuals' behaviors.

Walter Mischel

A psychologist best known for his research on personality theory and cognitive-affective behavior, including the famous marshmallow test associated with delayed gratification.