19. Assume you are using the dividend growth model to value stocks. If you expect the inflation rate to increase, you should also expect:

A) market values of all stocks to remain constant as the dividend growth will offset the increase in inflation.

B) stocks that do not pay dividends to decrease in price while the dividend-paying stocks maintain a constant price.

C) market values of all stocks to decrease, all else constant.

22. An asset with an expected return that lies below the Security Market Line is considered to be:

A) overvalued.

B) fairly valued.

C) undervalued.

25. For a diversified investor, the primary risk the portfolio is subject to is the:

A) systemic risk.

B) systematic risk.

C) specific risk.

26. Estimates using the arithmetic average will probably tend to ___________ values over the long-term while estimates using the geometric average will probably tend to _______ values over the short-term.

A) underestimate; overestimate

B) overestimate; be accurate

C) overestimate; underestimate