stocks A, B and C have identical risks. Stock A earns an annual return of 9.9 pe
ID: 3147016 • Letter: S
Question
stocks A, B and C have identical risks. Stock A earns an annual return of 9.9 percent as compared to 9.6 percent on stocks B and C. Given this, you can correctly assume that: 1. Stock A is overpriced 2. The market return is 9.75 percent 3. Stock A represents the smallest sized firm 4. Stock A has a positive excess return 5. Stocks B and C represent firms that are in progress of merging stocks A, B and C have identical risks. Stock A earns an annual return of 9.9 percent as compared to 9.6 percent on stocks B and C. Given this, you can correctly assume that: 1. Stock A is overpriced 2. The market return is 9.75 percent 3. Stock A represents the smallest sized firm 4. Stock A has a positive excess return 5. Stocks B and C represent firms that are in progress of merging stocks A, B and C have identical risks. Stock A earns an annual return of 9.9 percent as compared to 9.6 percent on stocks B and C. Given this, you can correctly assume that: 1. Stock A is overpriced 2. The market return is 9.75 percent 3. Stock A represents the smallest sized firm 4. Stock A has a positive excess return 5. Stocks B and C represent firms that are in progress of mergingExplanation / Answer
We do not have information available whether there any correlation between companies A, B and C.
We cannot predict the market returns from only 3 stocks.
there is no correlation between returns and size of the company
Merging can not be predicted from returns
Hence the only thing we can assume is 4. Stock A has a positive excess return
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