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20 sa Stock DET 16 14 12 Stock AIL 30 RATE OF RETURN (Percent) Stock INO 2 02 04 00 14 10 3.0 00 10
20 sa Stock DET 16 14 12 Stock AIL 30 RATE OF RETURN (Percent) Stock INO 2 02 04 00 14 10 3.0 00 10 12 RISK (Beta) A stock is in equilibrium If its required retum Its expected retum. In general, assume that markets and stocks are in equilibrium (or fairly valued), but sometimes investors have different opinions about a stock's prospects and may think that a stock is out of equilibrium (either undervalued or overvalued). Based on the analyst's expected return estimates, stock INOIS stock AIL is in equilibrium, and stock DET is
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