1 1 7-20 You have observed the following returns over time: Historical Returns: Expected and Required Year Stock X Stock Y Market Rates of Return 2011 149 13% 129 2012 19 7 10 2013 -16 -5 -12 2014 3 2015 20 11 15 Assume that the risk-free rate is 4%, the market risk premium is 5%, the beta for Stock X is 1.50, and the beta for Stock Y is 0.46: What are the required rates of return for Stocks X and Y? b. What is the required rate of return for a portfolio consisting of 40% of Stock X and 60% of Stock Y? If Stock X's expected return is 13%, is Stock X under-or overvalued ? a. C NEL