Q1. Stocks that represent underpriced investments will have returns that are greater than returns, and will plot the security market line. A. expected; required, above B. required; expected; above C. expected; risk-free; above D. required, expected; below E. expected; required; below Q2. Risk that can be removed through diversification is called A. total risk B. stand-alone risk C. systematic risk D. market risk E. unsystematic risk Q3. The firm of Steve Dallas Promotions (SDP) is trying to estimate its cost of common equity using the Capital Asset Pricing Model (CAPM). Assuming that the risk- free interest rate (R) equals 6%, the market's required return (R) is 14.5% and that the beta for SDP (B) is 1.25, what is the CAPM cost of common equity? A. 7.250% B. 10.625% C. 12.125% D. 16.625% E. 18.125%