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1) Consider two stocks, A and B. Stock A has an expected return of 10% and a beta of 1.2 . Stock B has an
1) Consider two stocks, A and B. Stock A has an expected return of 10% and a beta of 1.2 . Stock B has an expected return of 14% and a beta of 1.8 . The expected market rate of return 1 s 9% and the risk-free rate is 5%. Security would be considered the better buy because A) A; it offers an expected excess return of . 2% B) B; it offers an expected return of 2.4% C) A; it offers an expected excess return of 2,2\%D) B; it offers an expected excess return of 1.8% 2) A convertible bond has a par value of $1,000, but its current market price is $950. The current price of the issuing company's stock is $19, and the conversion ratio is 40 shares. The bond's conversion premium is A) $50 B) $190 C) $240 D) $200
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