The Risk-Free Rate Is 7

question 39

Multiple Choice

The risk-free rate is 7%. The expected market rate of return is 15%. If you expect a stock with a beta of 1.3 to offer a rate of return of 12%, you should

• A) buy the stock because it is overpriced.
• B) sell short the stock because it is overpriced.
• C) sell the stock short because it is underpriced.
• D) buy the stock because it is underpriced.
• E) None of the options, as the stock is fairly priced.

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Definitions:

Mixers

Devices used to blend, beat, or whip ingredients together into a coherent mixture.

Average Total Cost

The total cost of production divided by the quantity of output produced, indicating the cost per unit of output.

Range of Output

The spectrum or variety of product quantities that a production process or industry can produce, from minimum to maximum.

Mixers

Electronic or mechanical devices used to combine, blend, or process ingredients or substances in various industries, or an event primarily intended to encourage socializing.