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Stock A has a beta of 1.1 and an expected return of 12%. Stock B has a beta of .92 and an expected return of 10. The risk-free rate is 3.5% and the...

Stock A has a beta of 1.1 and an expected return of 12%. Stock B has a beta of .92 and an expected return of 10.25%. The risk-free rate is 3.5% and the expected return on the market is 11%.Are these stocks correctly priced? Why or why not?
1. No; Stock A is underpriced and stock B is overpriced.
2. No; Stock A is overpriced and stock B is underpriced.
3. No; Stock A is overpriced but stock B is correctly priced.
4. No; Stock A is underpriced but stock B is correctly priced.
5. Yes; Both stocks are correctly priced.

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