Stock A has a beta of 1.92 and an expected return of 19.04 percent. Stock B has a beta of 1.04 and an expected return of 10.51 percent. Stock C has a beta of 1.36 and an expected return of 15.68 percent. The risk-free rate is 3 percent and the expected return of the market portfolio is 11.6 percent. Which of these stocks are underpriced? A. C only B. A and C only C. A only D. B only
The rate of return on the common stock of Flowers by Flo is expected to be 20 percent in a boom economy, 11 percent in a normal economy, and only 3 percent in a recessionary economy. The probabilities of these economic states are 20 percent for a boom, 70 percent for a normal economy, and 10 percent for a recession. What is the variance of the returns on this stock? A. 0.11724 B. 0.00216 C. 0.03290 D. 0.00968
This morning you purchased one share of stock for $46. The stock pays $4.20 per share each year as a dividend. What must the stock price be one year from now if you want to earn a total return of 12 percent for the year? A. $51.52 B. $47.32 C. $50.07 D. $46.11