An analyst performs a regression analysis of the excess return on XYZ vs. the excess return on the Russel 3000 index He finds beta 1.2 and alpha-0 6% The analyst believes that the index is a good substitute fotthe market portfolio. What should this analyst conclude? A. The stock is likely to be undervalued. B. The stock is likely to be overvalued C. The stock is likely to be correctly priced 5. "The Sh A. True B. False arpe ratio of the S&P500 index for the period 1986-2013 was on average 0.47" 6. Consider a stock with a forward P-E rati 10 of 60, The company plows back 80% of its earnings, and the required rate of return on the stock is 15%. If the company is valued by the constant growth model what will be the effect of the Fed raising interest rates by 0.25% on the value of this company? A. The stock price will decline by 27.15% B. The stock price will decline by 34.28% C. The stock price will decline by 42.86% D. The stock price will decline by 7.27% E. None of the above 7. Assuming semiannual compounding, a 20-year zero coupon bond with a par value of $1,000 and a required return of 12% would be priced at A. $97 B. $104 C. $364 D. $732 8. An investor needs cash to pay some hospital bills. He is willing to use his dividend income to pay the bills but he will not sell any stock to do so. According to the behavioral finance literature, he is engaging in A. overconfidence B. representativeness C. forecast errors D. mental accounting