Multiple Choice
The risk-free rate is 4%.The expected market rate of return is 11%.If you expect stock X with a beta of .8 to offer a rate of return of 12 percent,then you should _________.
A) buy stock X because it is overpriced
B) buy stock X because it is underpriced
C) sell short stock X because it is overpriced
D) sell short stock X because it is underpriced
Correct Answer:
Verified
Correct Answer:
Verified
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