Q19. An analyst wants to determine whether Dover Holdings is overvalued or undervalued, and by how much (expressed as percentage return). The analyst gathers the following information on the stock: - Market standard deviation = 0.70
- Covariance of Dover with the market = 0.85
- Dover’s current stock price (P0) = $35.00
- The expected price in one year (P1) is $39.00
- Expected annual dividend = $1.50
- 3-month Treasury bill yield = 4.50%.
- Historical average S&
 500 return = 12.0%.
Dover Holdings stock is: A) undervalued by approximately 2.1%. B) overvalued by approximately 1.8%. C) undervalued by approximately 1.8%.
Q20. If a stock is located above the security market line (SML), an investor would consider the stock to be:
A) undervalued, with less risk then expected for its expected return.
B) efficiently priced but the market is not.
C) overvalued, with too much risk for its expected return.
Q21. The expected rate of return is 2.5 times the 12% expected rate of return from the market. What is the beta if the risk-free rate is 6%? A) 5. B) 3. C) 4.
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发表于 2009-1-22 11:10
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