2. As a senior analyst in ABC Asset Management you have evaluated the performance of two...

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2. As a senior analyst in ABC Asset Management you have evaluated the performance of two stocks Finsolve plc and Gamma Plc. You have gathered the following information Risk free rate is 5% The expected return on the market portfolio is 11.5% The beta of Finsolve plc is 1.5 The beta of Gamma plc is 0.8 Based on your own analyses, ABC Assets Management's forecasts of the returns on the two stocks are 13.25% for Finsolve plc and 11.25% for Gamma plc. Calculate the required rate of return for Finsolve plc and Gamma plc stocks. Indicate whether each stock is overvalued, undervalued or fairly price and thereby provide recommendation whether to buy, hold or sell these two stocks. 2. As a senior analyst in ABC Asset Management you have evaluated the performance of two stocks Finsolve plc and Gamma Plc. You have gathered the following information Risk free rate is 5% The expected return on the market portfolio is 11.5% The beta of Finsolve plc is 1.5 The beta of Gamma plc is 0.8 Based on your own analyses, ABC Assets Management's forecasts of the returns on the two stocks are 13.25% for Finsolve plc and 11.25% for Gamma plc. Calculate the required rate of return for Finsolve plc and Gamma plc stocks. Indicate whether each stock is overvalued, undervalued or fairly price and thereby provide recommendation whether to buy, hold or sell these two stocks.

Answer rating: 100% (QA)

To calculate the required rate of return for Finsolve plc and Gamma plc stocks we can use the Capita... View the full answer