Stock a Has a Beta of

question 48

Multiple Choice

Stock A has a beta of .68 and an expected return of 8.1 percent.Stock B has a beta of 1.42 and an expected return of 13.9 percent.Stock C has beta of 1.23 and an expected return of 12.4 percent.Stock D has a beta of 1.31 and an expected return of 12.6 percent.Stock E has a beta of .94 and an expected return of 9.8 percent.Which one of these stocks is the most accurately priced if the risk-free rate of return is 2.5 percent and the market risk premium is 8 percent?

• A)Stock A
• B)Stock B
• C)Stock C
• D)Stock D
• E)Stock E

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Definitions:

Trial and Error

A problem-solving method involving repeated, varied attempts which are continued until success, or until the practitioner stops trying.

Mood Stabilizer

Medication used to treat mood disorders such as bipolar disorder, helping to prevent extreme shifts in mood.

Stimulant

Substances that increase levels of neural activity in the body, resulting in increased alertness, attention, and energy.

Hyperactive

Describes a state of increased energy and movement, often referring to an inability to remain still, commonly associated with ADHD.