A Stock with an Actual Return That Lies Above the Security

question 31

Multiple Choice

A stock with an actual return that lies above the security market line:

• A)has less systematic risk than the overall market.
• B)has more risk than warranted based on the realized rate of return.
• C)has yielded a return equivalent to the level of risk assumed.
• D)has more systematic risk than the overall market.
• E)has yielded a higher return than expected for the level of risk assumed.

Identify and explain the fundamental attribution error.

Understand self-serving bias and its impact on personal perception.

Comprehend the concepts of actor-observer bias and defensive attribution.

Recognize the role of similarity and attraction in interpersonal relationships.

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