Stock a Has an Expected Return of 12%, a Beta

question 100

Multiple Choice

Stock A has an expected return of 12%, a beta of 1.2, and a standard deviation of 20%.Stock B also has a beta of 1.2, but its expected return is 10% and its standard deviation is 15%.Portfolio AB has $300,000 invested in Stock A and $100,000 invested in Stock B.The correlation between the two stocks' returns is zero (that is, r_A,B = 0) .Which of the following statements is CORRECT?

• A) The stocks are not in equilibrium based on the CAPM; if A is valued correctly, then B is overvalued.
• B) The stocks are not in equilibrium based on the CAPM; if A is valued correctly, then B is undervalued.
• C) Portfolio AB's expected return is 11.0%.
• D) Portfolio AB's beta is less than 1.2.
• E) Portfolio AB's standard deviation is 17.5%.

Understand the concept of quasi contracts and distinguish them from oral and implied contracts.

Recognize the significance of the statute of limitations in contract enforcement.

Understand the legal implications of contracts involving parties with limited capacity, such as minors or those declared incompetent.

Identify the scope of the UCC's relevance, including its modern applicability and amendments.

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