A. An investor should not buy this stock because its expected rate of return is 9.6%, and its required rate of return is 11.69%.
B. An investor should buy this stock because its expected rate of return is 11.69%, and its required rate of return is 9.6%
C. An investor should buy this stock because its expected rate of return is 12.54%, and its required rate of return is 8.28%,
D. An investor should not buy this stock because its expected rate of return is only 8.28%, and its required rate of return is 12.54%
E. An investor should be indifferent toward buying or selling the stock, because its required rate of return is equal to its expected rate of return.
ANSWER:
B. An investor should buy this stock because its expected rate of return is 11.69%, and its required rate of return is 9.6%