A Stock Has a Beta of the Stock Is 1

question 109

Multiple Choice

A stock has a beta of the stock is 1.25. The risk free rate is 5% and the return on the market is 6%. The estimated return for the stock is 14%. 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.

---

Definitions:

Social Loafing

The tendency of individuals to put forth less effort when working in a group compared to when working alone.

Deindividuation

A psychological state characterized by diminished self-consciousness and decreased sense of personal responsibility, often occurring in group settings.

Social Facilitation

The tendency for people to perform differently when in the presence of others than when alone, often improving on simple tasks and performing poorly on complex tasks.

Shock Experiments

Psychological experiments studying reactions to distressing situations, often associated with studies on obedience and learning.