Which One of the Following Stocks Is Correctly Priced If

question 47

Multiple Choice

Which one of the following stocks is correctly priced if the risk-free rate of return is 2.5% and the market risk premium is 8%? $$\begin{array} { l r c } \underline{\text { Stock } }& \underline{ \text { Beta } }& \underline{\text { Expected Return } }\\\text { A } & .68 & 8.2 \% \\\text { B } & 1.42 & 13.9 \% \\\text { C } & 1.23 & 11.8 \% \\\text { D } & 1.31 & 12.6 \% \\\text { E } & .94 & 9.7 \%\end{array}$$

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Definitions:

Margin of Error

In statistics, it represents the range within which the true value of a population parameter is expected to fall, given a certain level of confidence.

Confidence Interval

A range of values derived from sample statistics that is likely to contain the value of an unknown population parameter.

P-Value

A measure in statistical hypothesis testing that helps in determining the significance of results.

Alumni Association

An organization of graduates or former students (alumni) aimed at fostering connections and support between members and their alma mater.