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6) Stock ABC has a market beta of 1.2. The risk-free rate is 3%, and the market risk premium equals 4%. a. Compute the expected

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6) Stock ABC has a market beta of 1.2. The risk-free rate is 3%, and the market risk premium equals 4%. a. Compute the expected return for stock ABC. b. Assume the true expected return is 6%. What is stock ABC's alpha? (Assume that the CAPM is the correct asset pricing model.) c. Is stock ABC fairly priced, underpriced, or overpriced? Please explain your answer for full credit. 1

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