Question
Here are data on two companies. The T-bill rate is 4% and the market risk premium is 6%. Company $1 Discount Store Everything $5 Forecast
Here are data on two companies. The T-bill rate is 4% and the market risk premium is 6%.
| Company | $1 Discount Store | Everything $5 | ||
| Forecast return | 12% | 11% | ||
| Standard deviation of returns | 8% | 10% | ||
| Beta | 1.5 | 1.0 | ||
|
| ||||
Based on the fair return and according to the capital asset pricing model (CAPM), is each firm properly priced?
| Company | Expected Return | ||
| $1 Discount Store | (Click to select)Properly pricedUnderpricedOverpriced % | ||
| Everything $5 | (Click to select)UnderpricedProperly pricedOverpriced % | ||
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Core Concepts Of Information Technology Auditing
Authors: James E Hunton, Stephanie M Bryant, Nancy A Bagranoff
1st Edition
0471222933, 9780471222934
