Price of stock is twice as large as price of these stocks

Assignment Help Financial Management

Reference no: EM131476865

Stock A has a beta of 1.4 and an expected return of 16 percent. Stock B has a beta of 0.80 and an expected return of 11 percent. If the risk-free rate is 5 percent, the expected return on the market is 13 percent, and the CAPM holds, which of the following statements about the prices of these stocks is correct?

a. The market price of stock A is twice as large as the price of these stocks is correct?

b. Stock A is overpriced, and Stock B is underpriced

c. Stock A is underpriced, and Stock B is overpriced

d. Both stocks are overpriced

e. Both stocks are underpriced

Reference no: EM131476865

Questions Cloud

Determining the confidence interval : Explain why a confidence interval would or would not be appropriate?

Define all levels of group development : Analyze how your small group developed throughout the semester. Consider each of the levels of group development (forming, storming, norming, performing).

What are the four main financial objectives of a frim : What are the four main financial objectives of a frim? What is the purpose of a forecast?

Discuss and explain the term social institution : Discuss and explain the term social institution, as it applies to organized crime.

Price of stock is twice as large as price of these stocks : Stock A has a beta of 1.4 and an expected return of 16 percent. The market price of stock A is twice as large as the price of these stocks is correct?

What is your net profit per share from this position : what is your net profit per share from this position?

Analyze the tests conducted on materials found in structure : Examine the applicable building codes for this structure. How were they developed?Analyze the tests conducted on materials found in the structure.

Define critical chain approach : Would the outcome of the scheduling process have been any different had the critical chain approach been used?

Filed an action for breach of fiduciary duty : BSL 304 Case -trial court granted summary judgment to the Daniels based off of a statue that asserts that partners do not breach duty if their conduct only furthers their own interest.

User Account

All Pages