7. The risk-free rate is 4%. The expected market rate of return is 11%. If you expect stock X with a beta of.8 tooffer arate ofretum of 12 percent, then you should A. buy stock X because it is overpriced B. buy stock X because it is underpriced C. sell short stock X because it is overpriced D. sell short stock X because it is underpriced 38. The price of a safe zero-coupon bond maturing in 10 years is $600. The price of a similar zero-coupon bond maturing in 9 years is $650. What the forward interest rate is for the 10 year from now, reflected in this price? A. 5% B. 2.98% C. more information is needed D. 8.33% E. 11.05% 39. Higher portfolio turnover I. results in greater tax liability for investors IL. results in greater trading costs for the fund, which investors have to pay for III. is a characteristic of asset allocation funds A. I only B. II only C. 1 and II only D. I, II and III 40. You write one IBM July 120 call contract for a premium of $4. You hold the option until the expiration date when IBM stock sells for $121 per share. You will realize aon the investment A. $300 profit B. $200 loss C. $600 loss D. $200 profit 41. You buy one Hewlett Packard August 50 call contract and one Hewlett Packard August 50 put contract. The call premium is $1.25 and the put premium is $4.50. Your highest potential loss from this position is A. $125 B. $450 C. $575 D. unlimited