In an Efficient Market,a Stock with a Standard Deviation of Returns

question 115

True/False

In an efficient market,a stock with a standard deviation of returns of 12% could have a higher expected return than a stock with a standard deviation of 10% because the beta for the higher standard deviation stock could be lower than the beta for the lower standard deviation stock.

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Definitions:

Depreciation

The process of allocating the cost of tangible assets over their useful lives, reflecting the decrease in value of assets due to use, wear and tear, or obsolescence.

Implicit Cost

An indirect, non-payment expense represented by the opportunity cost of utilizing resources in a specific project instead of elsewhere.

Expected Profit Rate

The forecasted return on investment over a specific period, reflecting the potential profitability of a business endeavor.

Profit Rate

The ratio of profits earned to the amount of capital invested over a given period, indicating the efficiency of using capital in production.