A stock has a beta of 1.8. A security analyst who specializes in studying this stock expects
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A stock has a beta of 1.8. A security analyst who specializes in studying this stock expects its return to be 18 percent. Suppose the risk-free rate is 5 percent and the market risk premium is 8 percent. Is the analyst pessimistic or optimistic about this stock relative to the market’s expectations?
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