2020 Saved Help Save & Exit Submit 38 In the question above (#37), you calculated the return you expected from holding ENCANA stock using the CAPM. However, when you plot this on the Security Market Line (SML), you find that it plots well above the SML. What conclusions can you draw from this observation? 02:27:32 Multiple Choice All of the above are true. ENCANA stock is under-valued. The stock price should rise until the stock once again plots along the SML ENCANA stock is over valued. The stock price should fall until the stock once again plots along the SML. Neither of the above are true. Next > Saved Help Save & Exit 5 According to Yahoo Finance, ENCANA has a Beta of 112. If the yield on Treasury bills is 4% and the appropriate market risk premium is 5% what return would you expect from holding ENCANA stock? 27:40 Multiple Choice 11.0% 9.6% 10.2 80% Help Save & Exit Submit For the next three questions (34-36), assume that we now hold a portfolio of three stocks: RIM, ENCANA and Reitmans. The relevant information includes: U 27.48 Reitmans 14% 20% 30% RIM ENCANA Arithmetic Mean 6% 22% Standard Deviation 75% 20% Proportion of Portfolio 40% 30% Correlation: 0.00 RIM & ENCANA Correlation -0.25 RIM & Reitmans Correlation: -0.30 ENCANA & Reitmans Which stock adds the most risk to the portfolio? Multiple Choice Reitmans 36 of 50# Next > 7:22 PM