USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 112

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You expect the risk-free rate (RFR) to be 3 percent and the market return to be 8 percent. You also have the following information about three stocks.

-Refer to Exhibit 7.2. What is your investment strategy concerning the three stocks?

• A) buy X and Y; sell Z
• B) sell X, Y, and Z
• C) sell X and Z; buy Y
• D) buy X, Y, and Z
• E) buy X and Z; sell Y

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Definitions:

Earnings Per Share

Earnings per share (EPS) is a financial metric that divides a company's profit by the number of its outstanding shares, indicating the company's profitability on a per-share basis.

Efficient Market

A market hypothesis that posits that asset prices fully reflect all available information, making it impossible to consistently achieve higher returns.

Investor Expectations

The assumptions or beliefs about future economic and financial market conditions that influence investment decisions.

Market Value

The cost at which a property would be sold in a competitive bidding environment.