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2. 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,
2. 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 8% 16% Beta 0.90 1.10 Risk-free rate 4% 4% Market rate of return 10% 10% Pr 10.64 9.43 Pe 12.50 6.25
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