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1. Which of the following stocks is overvalued/undervalued? Compute the expected and required values. Graph the Security Market Line and plot Stock A, Stock B,

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1. Which of the following stocks is overvalued/undervalued? Compute the expected and required values. Graph the Security Market Line and plot Stock A, Stock B, the market, and the risk-free rate. Stock A Stock B Expected return Beta 10% 0.80 14% 1.20 Risk-free rate Market rate of return 690 12% 690 12%

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