4 pts D Question 4 Questions 4-6 are based on the information that follows. Rx+ 15% and om 12%. The risk-free rate of return is 5%. A stock has a beta of 1,30 and is priced at $130.80. Everyone expects that by the end of one year the stock which pays no dividend will trade at $175.00 and these expectations are realized You too believe in the accuracy of the forecast as well as in the validity of the SML relationship. 4. Please select the most accurate statement. This stock (a) is mispriced and its expected return lies on the SML (b) is mispriced, and its expected return therefore plots below the SML (c) has an expected return that plots above the SML and is an underpriced stock (d) has an expected return that plots above the SML and is an overpriced stock. le) is mispriced and its expected return lies parallel with the SML O O. Question 5 Questions 4-6 are based on the information that follows. Ry 15% and ou -12%. The risk-free rate of return is 5%. A stock has a beta of 1.30 and is priced at $130.80. Everyone expects that by the end of one year the stock which pays no dividend will trade at $175.00 and these expectations are realized. You too believe in the accuracy of the forecast as well as in the validity of the SML relationship 5. Based on the information above, and your rational viewpoint, the stock is la) underpriced by 8.11% (b) underpriced by 18.50% I overpriced by 6.95% (d) overpriced by 8.82% le) underpriced by 11.80%. ob e Questions 4-6 are based on the information that follows. Ry -15% and om 12%. The risk-free rate of return is 5%. A stock has a beta of 1.30 and is priced at $130.80. Everyone expects that by the end of one year the stock which pays no dividend will trade at $175.00 and these expectations are realized. You too believe in the accuracy of the forecast as well as in the validity of the SML relationship. 6. Please select the most accurate statement. Rational people who also believe in SML theory will conclude that the stock has relatively high systematic risk. They will be La) net buyers of the stock, even though its risk is 30% higher than that of the market. (b) net sellers of the stock, even though its risk is 30% higher than that of the market. (holders of the stock, but will sell it before the end of the year (d) net sellers of the stock, assuming price remains constant, once its 30% excess risk level declines and equals that of the market (e) net buyers of the stock, assuming price remains constant, once its 30% excess risk level declines and equals that of the market O OD Od 4 pts