Your Personal Opinion Is That a Security Has an Expected

question 3

Multiple Choice

Your personal opinion is that a security has an expected rate of return of 0.11. It has a beta of 1.5. The risk-free rate is 0.05 and the market expected rate of return is 0.09. According to the Capital Asset Pricing Model, this
Security is

• A) underpriced.
• B) overpriced.
• C) fairly priced.
• D) Cannot be determined from data provideD.11% = 5% + 1.5(9% - 5%) = 11.0%; therefore, the security is fairly priced.

---

Definitions:

Schwann Cell

A type of glial cell in the peripheral nervous system that wraps around neurons, forming a myelin sheath to facilitate electrical conduction.

Neuron

A specialized cell transmitting nerve impulses; a nerve cell, fundamental unit of the nervous system.

EPSP

Stands for Excitatory Postsynaptic Potential, a temporary increase in postsynaptic membrane potential caused by the flow of positively charged ions into the postsynaptic cell, making it more likely that the cell will fire an action potential.

Depolarization

A decrease in membrane potential that makes the interior of a cell less negative compared to the outside, crucial for nerve impulse transmission.