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3. You expect the risk-free rate (RFR) to be 3 percent and the market return to be 8 percent. You also have the following information
3. You expect the risk-free rate (RFR) to be 3 percent and the market return to be 8 percent. You also have the following information about three stocks. Current Expected Expected Stock Beta Price Price Dividend X 1.25 $20 $23 $1.25 Y 1.50 $27 $29 $0.25 Z 0.90 $35 $38 $1.00 a. What are the expected (required) rates of return for the three stocks (in the order X, Y, Z)? b. What are the estimated rates of return for the three stocks (in the order X, Y, Z)? c. Which stock is underpriced and which stock is overpriced? PLEASE USE EXCEL
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