The expected return on the market portfolio is 21%. The risk-free rate is 12%. T

Question

The expected return on the market portfolio is 21%. The risk-free rate is 12%. The expected return on SDA Corp. common stock is 20%. The beta of SDA Corp. common stock is 1.90. Within the context of the capital asset pricing model, _________.

A. SDA Stock is underpriced

B. SDA stock is fairly priced

C. SDA Corp. stock's alpha is –9.10%

D. SDA stock's alpha is 9.1%

The expected return on the market portfolio is 21%. The risk-free rate is 12%. The expected return on SDA Corp. common stock is 20%. The beta of SDA Corp. common stock is 1.90. Within the context of the capital asset pricing model, _________.

Explanation / Answer

option B is correct

i followed the elimination process and came to know that the remaining 3 are wrong statements.

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