The risk-free rate is 4 percent.The expected market rate of return is 11 percent.If you expect CAT with a beta of 1.0 to offer a rate of return of 13 percent,you should
A) buy CAT because it is overpriced.
B) sell short CAT because it is overpriced.
C) sell stock short CAT because it is underpriced.
D) buy CAT because it is underpriced.
E) none of the above,as CAT is fairly priced.
Correct Answer:
Verified
Q49: Studies of liquidity spreads in security markets
Q50: The risk premium on the market portfolio
Q51: The security market line (SML)
A)can be portrayed
Q52: If investors do not know their investment
Q53: What is the expected return of a
Q55: An overpriced security will plot
A)on the Security
Q56: The capital asset pricing model assumes
A)all investors
Q57: An underpriced security will plot
A)on the Security
Q58: The capital asset pricing model assumes
A)all investors
Q59: The capital asset pricing model assumes
A)all investors
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