Question
Use the information about Company X below to help answer this question: Cost of Equity 12.0% US Government 10Y Bonds 3.0% Expected Market Return 15.0%
Use the information about Company X below to help answer this question:
Cost of Equity 12.0%
US Government 10Y Bonds 3.0%
Expected Market Return 15.0%
Based on the company's beta, which of the following statements (I,II) is (are) TRUE:
I. The company is most likely a cyclical stock
II. The company's share price is less sensitive to changes in the SP500 than the share price of the average company in the SP500
HINT: Use the Security Market Line method; the market (by definition) has a beta of 1.00
a) I b) II c) I & II d) None of the statements e) All of the statements
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