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A common stock has a beta of 1.1. The risk free rate is equal to 4% and the market risk premium is equal to 6%

A common stock has a beta of 1.1. The risk free rate is equal to 4% and the market risk premium is equal to 6% and the Security Market Line is valid. The current price of the stock is equal to $15, and based on this price the expected return on the stock is equal to 15%. The stock is undervalued. (Yes = 1, No = 2).

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