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q: The common stock of Alpha Manufacturers has a b...

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q: The common stock of Alpha Manufacturers has a beta of 1.47 and an actual expected return of 15.26 percent. The risk-free rate of return is 4.3 percent and the market rate of return is 12.01 percent. Which one of the following statements is true given this information? a: To be correctly priced according to CAPM, the stock should have an expected return of 21.95 percent. The actual expected stock return will graph above the Security Market Line. The actual expected stock return indicates the stock is currently overpriced. The stock has less systematic risk than the overall market. The stock is underpriced.

 

Paper#5318 | Written in 18-Jul-2015

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