A Friend Has Information That the Stock of Zip Incorporated

question 24

Multiple Choice

A friend has information that the stock of Zip Incorporated is going to rise from $62.00 to $65.00 per share over the next year. You know that the annual return on the S&P 500 has been 10 percent and the 90-day T-bill rate has been yielding 6 percent per year over the past 10 years. If beta for Zip is 0.9, will you purchase the stock?

• A) Yes, because it is overvalued.
• B) Yes, because it is undervalued.
• C) No, because it is undervalued.
• D) No, because it is overvalued.
• E) Yes, because the expected return equals the estimated return.

---

Definitions:

Machinery Manufacturers

Entities involved in the production of machines and industrial equipment.

Virtual Marketing Channel

Digital pathways through which companies promote and sell their products or services online, using platforms such as social media and websites.

Dual Distribution

A strategy where a manufacturer sells products through multiple distribution channels, often including directly to consumers and through resellers or agents.

Distribution Density

The extent of a product's availability across a geographic area or within a distribution network, influencing market saturation.