You are considering the two securities shown below. Which of the following statements is uniquely differentabout Security 4 relative to Security 2?R4R2f 44RMRMOnly Security 4 has a positive estimated beta.Security 4 has a higher beta than Security 2.Security 4 has a higher R² than Security 2.O Only Security 4 has a positive estimated alpha.

We have given a scatter plot by drawing the fitted linear regression line for the two different…

Answered: You are considering the two securities…

You are considering the two securities shown below. Which of the following statements is uniquely different about Security 4 relative to Security 2? ہے کہ ایک اور R2 RM R4 RM

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 10MC

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Concept explainers

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.

Question

You are considering the two securities shown below. Which of the following statements is uniquely different
about Security 4 relative to Security 2?
R4
R2
f 44
RM
RM
Only Security 4 has a positive estimated beta.
Security 4 has a higher beta than Security 2.
Security 4 has a higher R² than Security 2.
O Only Security 4 has a positive estimated alpha.

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