9. Suppose that an SML indicates that assets with a beta = 1.15 should have an average

Question:

9. Suppose that an SML indicates that assets with a beta = 1.15 should have an average expected rate of return of 12 percent per year. If a particular stock with a beta = 1.15 currently has an average expected rate of return of 15 percent, what should we expect to happen to its price? LO37.8

a. Rise.

b. Fall.

c. Stay the same.

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