1. The risk-free rate is 3.7 percent and the expected return on the market is 12.3 percent. Stock A has a beta of 1.1 and an expected return of 13.1 percent. Stock B has a beta of .86 and an expected return of 11.4 percent. Are these stocks correctly priced? Why or why not?
Using CAPM, the required return... View the full answer
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No, Stock A is overpriced and Stock B is underpriced Required return = Risk free rate + Beta *(Market... View the full answer