Stocks D,E,and F Have Actual Reward-To-Risk Ratios of 7

question 88

Multiple Choice

Stocks D,E,and F have actual reward-to-risk ratios of 7.1,6.8,and 7.4,respectively.Given this,you know for certain that:

• A) stock E is preferable to stock F.
• B) stock D has a higher beta than stock F.
• C) the market risk premium is greater than 6.8 and less than 7.4.
• D) stock F is riskier than stock D.
• E) at least two of the securities are mispriced.

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Definitions:

Maturity Date

the specific date on which a financial instrument, such as a loan or bond, reaches its expiration and the principal is due to be repaid.

Promissory Note

A financial instrument containing a written promise by one party to pay another a definite sum of money either on demand or at a specified future date.

Negotiable

Capable of being transferred or assigned from one party to another, often used in the context of financial instruments.

Nonexistent Person

A fictional or imagined individual who does not exist in reality.