Question
71. The risk-free rate is 4 percent. The expected market rate of return is 12 percent. If you expect stock X with a beta
71. The risk-free rate is 4 percent. The expected market rate of return is 12 percent. If you expect stock X with a beta of 1.0 to offer a rate of return of 10 percent, you should A. buy stock X because it is overpriced. B. sell short stock X because it is overpriced. C. sell stock short X because it is underpriced. D. buy stock X because it is underpriced. E. none of the above, as the stock is fairly priced.
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Fundamentals of Corporate Finance
Authors: Berk, DeMarzo, Harford
2nd edition
132148234, 978-0132148238
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