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Q4. Assume the following data for a stock: Beta = 1.5; risk-free rate=4 percent; market rate of return = 12 percent; and expected rate of
Q4. Assume the following data for a stock: Beta = 1.5; risk-free rate=4 percent; market rate of return = 12 percent; and expected rate of return on the stock = 15 percent. Then the stock is (4 points) A. overpriced. B. underpriced. C. correctly priced. D. cannot be overpriced. Q5. You expect Company Astock to have a beta of 1.3 over the next year and Company B stock to have a beta of 0.9 over the next year. Also, you expect the volatility of Company Astock returns to be 40% and that of Company B stock returns to be 50% over the next year. Therefore, _has more systematic risk, and has more total risk. (4 points) A. Company B. Company A B. Company A, Company A C. Company B, Company B D. Company A, Company B
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