The common stock of DEE Bhd. has a beta of 1.24 and an actual expected return of 13.25 percent. The risk-free rate of return is 3.7 percent and the market rate of return is 11.78 percent. Which one of the following statements is TRUE given this information? Select one: A. The actual expected stock return indicates the stock is currently overpriced. B. The stock is currently underpriced. C. The stock has less systematic risk than the overall market. D. The actual expected stock return will graph above the security market lin
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
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[Question text] The common stock of DEE Bhd. has a beta of 1.24 and an actual expected return of 13.25 percent. The risk-free
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