The common stock of PDS has a beta of.98 and an expected return of 12.34%. The risk-free rate of return is 4.1% and the market rate of return is 11.65%. Which one of the following statements is true given this information?
A) The return on PDS stock will graph below the Security Market Line.
B) PDS stock is underpriced.
C) The expected return on PDS stock based on the Capital Asset Pricing Model is 15.52%.
D) PDS stock has more systematic risk than the overall market.
E) PDS stock is correctly priced.
Correct Answer:
Verified
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