A Stock Has a Beta of 1

question 4

Multiple Choice

A stock has a beta of 1.25. The risk-free rate is 5 percent and the return on the market is 6 percent. The estimated return for the stock is 14 percent. According to the CAPM, you should

• A) sell because it is overvalued.
• B) sell because it is undervalued.
• C) buy because it overvalued.
• D) buy because it is undervalued.
• E) short because it is undervalued.

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Definitions:

Segmentation Attractiveness

The degree to which a market segment is considered desirable for a company to enter based on factors like size, profitability, and accessibility.

Ideal Point

The position at which a particular market segment’s ideal product would lie on a perceptual map.

Point of Parity

Elements of a product or brand that are similar to those of competitors, indicating a level of equality in the consumer's eyes.

Perceptual Map

A Perceptual Map is a visual tool used in marketing to depict consumers' perceptions of brands or products relative to competitors.