Assume the Risk-Free Rate Is 4

question 126

Multiple Choice

Assume the risk-free rate is 4.5 percent and the expected return on the market is 11 percent. You anticipate Stock XYZ to sell for $28 at the end of next year and pay a dividend of $2. The stock is currently selling for $26.50 with a beta of 1.2. You currently hold stock XYZ in a well-diversified portfolio. Assuming you have money to invest, you should

• A) buy stock XYZ.
• B) sell stock XYZ.
• C) do nothing because it is properly valued.
• D) invest your money in the risk-free rate of return.
• E) buy a put option.

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Definitions:

Latinos

People of Latin American origin or descent, often living in the United States.

Stepfamilies

Family units formed by the remarriage of a divorced or widowed person that include a child or children from a previous marriage.

Nuclear Families

A family structure consisting of two parents (a mother and a father) and their children, considered the traditional family unit.

Cohesive

Characterized by unity; sticking together tightly or working well together to form a whole.