QUESTION 1 Assume the following data for a stock: beta = 0.9; risk-free rate = 4 percent; market rate of return = 24 percent; and expected rate of return on the stock = 23 percent. Then the stock is: correctly priced. overpriced. this is the wrong answer underpriced. The answer cannot be determined.
QUESTION 1 Assume the following data for a stock: beta = 0.9; risk-free rate = 4 percent; market rate of return = 24 percent; and expected rate of return on the stock = 23 percent. Then the stock is: correctly priced. overpriced. this is the wrong answer underpriced. The answer cannot be determined.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Please do both questions
QUESTION 1
- Assume the following data for a stock: beta = 0.9; risk-free rate = 4 percent; market
rate of return = 24 percent; and expected rate of return on the stock = 23 percent. Then the stock is:
| correctly priced. | ||
| overpriced. this is the wrong answer | ||
| underpriced. | ||
| The answer cannot be determined. |
QUESTION 2
- Assume the following data for a stock: beta = 1.5; risk-free rate = 8 percent; market rate of return = 18 percent; and expected rate of return on the stock = 22 percent. Then the stock is:
| overpriced. | ||
| underpriced. this is the wrong answer | ||
| correctly priced. | ||
| cannot be determined |
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