The Expected Return of the Market Is 12 Percent, and the Risk-Free

question 61

Multiple Choice

The expected return of the market is 12 percent, and the risk-free rate is 4.5 percent. Stock K has a beta of 1.2 and an expected return of 14.2 percent. Stock L has a beta of 0.85 and an expected return of 10.3 percent. From this information, Stock K is ______ and Stock L is _______.

• A) overpriced; overpriced
• B) overpriced; underpriced
• C) underpriced; underpriced
• D) underpriced; overpriced
• E) Insufficient information.

---

Definitions:

Chronic Illnesses

Chronic Illnesses are long-term medical conditions that are persistent or otherwise lifelong in nature and can significantly impact an individual’s quality of life.

Self-Injurious Ways

Behaviors in which an individual causes harm to themselves as a way of dealing with emotional pain or distress.

At Risk

Conditions or factors that put a child in jeopardy of failure; negative outcome that an individual or an organization could likely experience.

Expectations For Failure

Anticipations or beliefs that an endeavor or task will not succeed or meet its objectives.