Which One of the Following Shares Is Correctly Priced If

question 63

Multiple Choice

Which one of the following shares is correctly priced if the risk-free rate of return is 2.5% and the market risk premium is 8%?
$\begin{array}{l}\begin{array}{|l|l|l|}\hlineShare &Beta &\text { Expected Retum }\\\hline \mathrm{A} & .68 & 8.2 \% \\\hline \mathrm{B} & 1.42 & 13.9 \% \\\hline \mathrm{C} & 1.23 & 11.8 \% \\\hline \mathrm{D} & 1.31 & 12.6 \% \\\hline \mathrm{E} & .94 & 9.7 \% \\\hline\end{array}\end{array}$

• A)A
• B)B
• C)C
• D)D
• E)E

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Definitions:

Commodities

Basic goods used in commerce that are interchangeable with other goods of the same type, often used as inputs in the production of other goods or services.

Prices

The monetary value assigned to goods or services, representing the amount a buyer pays to a seller in a market transaction.

Income

The income earned, usually periodically, from labor or investment returns.

Prices

The sum of money anticipated, needed, or provided as payment for an item.