A firm's class A common shares are currently trading for $13.70 on the Toronto Stock Exchange. The risk free rate prevailing in the market is currently 5%, the expected return on the market portfolio is 11%. The firm has a beta of 1.6 and is expected to pay a dividend of $2 forever. Under these conditions, the firm's common shares are currently: fairly valued. overvalued. undervalued. strongly valued. B. Which of the following is NOT a correct statement? Risk-averse investors require a risk premium to bear risk; the more risk averse they are, the higher the risk premium they require. Risk-averse investors are willing to pay an insurance premium to get out of a risky situation. Risk-averse investors will not willingly undertake fair gambles. Risk-averse investors prefer to gamble on a risky situation where there is an equal probability of winning or losing the same amount of money. C. The expected return on the market is 11.5% with a standard deviation of 13% and the risk-free rate is 4%. Which of the following portfolios are undervalued? 1 and 4 only 1 and 2 only 2 and 3 only 3 and 4 only