1. McDowell Company's stock has a beta of 0.9, the risk-free rate is 2.8%, and the return on the market is 9.4%. McDowell's required return is ____ %.

2. If a stocks price in general decreases, when the stock market goes up, but yet the stocks price does not decrease as much as the stock market increases, the stocks beta must be:

a) negative.

b) between -1 and zero.

c) between zero and 1.

d) larger than 1.

3. The relevant risk that a prudent investor should consider in his/her investment decisions is:

a) The investment's market risk.

b) Diversifiable risk of the investment.

c) The total risk the portfolio was exposed to.

d) The Company specific risk of the investment(s).

4. The following stocks is overvalued:

	Expected Rate of Return	Required Rate of Return
Stock A	13.60%	13.50%
Stock B	14.00%	14.00%
Stock C	15.00%	14.00%
Stock D	6.50%	7.00%

a) Stock A

b) Stock B

c) Stock C

d) Stock D

PLEASE ANSWER ALL QUESTIONS