Assume the Risk-Free Rate Is 4

question 106

Multiple Choice

Assume the risk-free rate is 4.5% and the expected return on the market is 11%. 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, what should you do?

• 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) Choices c and d.

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Definitions:

Communists

Members or supporters of a communist party, advocating for a society in which all property is publicly owned and each person works and is paid according to their abilities and needs.

Roosevelt's New Deal

Roosevelt's New Deal refers to a series of programs, public work projects, financial reforms, and regulations enacted by President Franklin D. Roosevelt in the 1930s, aimed at recovering the United States from the Great Depression.

Criticism

The practice of analyzing, evaluating, and sometimes questioning beliefs, actions, or works, often to foster improvement.

Costly

Refers to something that requires a great amount of resources, such as money, time, or effort, to obtain or maintain.