With respect to the security market line (SML) and the value of a stock, if the stock’s estimated return is greater than its expected (required) return, the stock plots:
A) above the SML and is overvalued
B) below the SML and is overvalued
C) above the SML and is undervalued
D) below the SML and is undervalued
maratikus Wrote:
——————————————————-
> Industry life cycles are typically categorized by
> the
>
> A) level of competition
> B) rates of growth in sales
> C) level of productive capacity
> D) rates of growth in return on equity.
maratikus Wrote:
——————————————————-
> With respect to the security market line (SML) and
> the value of a stock, if the stock’s estimated
> return is greater than its expected (required)
> return, the stock plots:
>
> A) above the SML and is overvalued
> B) below the SML and is overvalued
> C) above the SML and is undervalued
> D) below the SML and is undervalued
If the estimated return on the stock is greater than it’s expected return, means that the stock is currently ‘overvalued’, so it’s gonna plot below the SML line.
I assume the “new classical economists” is referring to Ricardo-Barro effect- “government budget deficit has not effect on the real interest rate or investment and financing government purchases by taxes or by borrowing are equivalent” - no change in aggregate demand and real interest rates
Industry life cycles are typically categorized by the
A) level of competition
B) rates of growth in sales
C) level of productive capacity
D) rates of growth in return on equity.
With respect to the security market line (SML) and the value of a stock, if the stock’s estimated return is greater than its expected (required) return, the stock plots:
A) above the SML and is overvalued
B) below the SML and is overvalued
C) above the SML and is undervalued
D) below the SML and is undervalued
maratikus Wrote:
——————————————————-
> Industry life cycles are typically categorized by
> the
>
> A) level of competition
> B) rates of growth in sales
> C) level of productive capacity
> D) rates of growth in return on equity.
A) by the level of competition
- Dinesh S
maratikus Wrote:
——————————————————-
> With respect to the security market line (SML) and
> the value of a stock, if the stock’s estimated
> return is greater than its expected (required)
> return, the stock plots:
>
> A) above the SML and is overvalued
> B) below the SML and is overvalued
> C) above the SML and is undervalued
> D) below the SML and is undervalued
If the estimated return on the stock is greater than it’s expected return, means that the stock is currently ‘overvalued’, so it’s gonna plot below the SML line.
Ans is ‘B’
- Dinesh S
both answers are incorrect, dinesh. let’s wait for other answers.
agrregate demand (no)
real interest rate (yes)
B) rates of growth in sales
C) above the SML and is undervalued
1. N, Y
2. C
3. C
Correct answers are:
1) No, No
2) B
3) C
I assume the “new classical economists” is referring to Ricardo-Barro effect- “government budget deficit has not effect on the real interest rate or investment and financing government purchases by taxes or by borrowing are equivalent” - no change in aggregate demand and real interest rates
answers are:
no/no
B) rates of growth in sales
C) above the SML and is undervalued
1) NO,No is clear because there are in the long run no real effects - if you don’t have an expectation problem.
2) Why is C (prod. cap) wrong?