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4. (a) Explain all the important aspects of the CAPM B. (12 points). (b) A stock's B = 1.6. We observer RF = 4% and
4. (a) Explain all the important aspects of the CAPM B. (12 points). (b) A stock's B = 1.6. We observer RF = 4% and E(TM) = 12%. At this moment in the stock market, the actual rate of return for the stock is 13%. Is the stock overvalued or undervalued? Explain. (6 points)
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