Use the Information for the Question(s)below

question 5

Multiple Choice

Use the information for the question(s) below.
Suppose that in the coming year,you expect Exxon-Mobil stock to have a volatility of 42% and a beta of 0.9,and Merck's stock to have a volatility of 24% and a beta of 1.1.The risk-free interest rate is 4% and the market's expected return is 12%.
-Which stock has the highest systematic risk?

• A)Merck since it has a higher beta
• B)Exxon-Mobil since it has a lower beta
• C)Exxon-Mobil since it has a higher volatility
• D)Merck since it has a lower volatility

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Definitions:

Respondeat Superior

A doctrine in agency law under which a principal (employer) may be held liable for the wrongful acts committed by agents or employees acting within the scope of their agency or employment.

Agency Law

The legal principles governing the relationship between an agent who acts on behalf of another person or entity, known as the principal, and the extent of their legal authority.

Principal-Employer

The primary entity or individual who employs and is responsible for the actions of their workers or agents.

Wrongful Acts

Actions or conduct that are unlawful or infringe upon someone's rights.