We know the following about a stock,

Beta =2

Risk-free rate =3%

Market return = 12%

Actual return = 18%

Is this stock a buy or sell?

You MUST show calculations that leads to the answer.

Answers not accompanied with calculations will receive ZERO marks even if correct.

An investor regressed the returns of stock A on the returns of the market and obtained the following:

	Coefficients		t Stat
Intercept	-0.0832		-3.0917
Market	0.9027		3.7929

Which of the following statement is most correct?

Select one:

a. Asset A is riskier than the market and is generating less than its expected return.

b. Asset A is safer than the market and is generating more than its expected return.

c. Asset A is safer than the market and is generating less than its expected return.

d. Asset A is riskier than the market and is generating more than its expected return.

Consider the following scenario.

The media discloses that company A will acquire company B. Almost all analysts agree that this is a very good news for company A. The media also discloses that the acquisition will occur on Jan 15, 2021 and the price is 4 billion dirhams.

On Jan 15, 2021, the media announces that the acquisition has occurred exactly as predicted. That is, A acquires B for 4 billion dirhams.

Which one of the following statements is most correct?

Select one:

a. On Jan 15, 2021, the stock price of A should move up because what was expected is now a reality.

b. On Jan 15, 2021, the stock price of A should not move by much because the news is quite expected.

c. On Jan 15, 2021, the stock price of A should move up because of the good news.

d. On Jan 15, 2021, the stock price of A should drop because the news is quite expected.