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The risk-free rate is 4 percent. The expected market rate of return is 11 percent. If you expect CAT with a beta of 0.8 to
The risk-free rate is 4 percent. The expected market rate of return is 11 percent. If you expect CAT with a beta of 0.8 to offer a rate of return of 10 percent, you should
A. | hold CAT because it is fairly priced. | |
B. | buy CAT because it is overpriced. | |
C. | buy CAT because it is underpriced. | |
D. | sell stock short CAT because it is underpriced. | |
E. | sell short CAT because it is overpriced. |
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