a) For each of the stocks listed below, determine which are underpriced, overpriced or correctly priced if the risk-free rate of return is 3.6% and the market rate of return is 10.5%. (11 marks)

b) In an efficient market, what occurs to bring the expected return and required return back into equilibrium? (2 marks)

Stock	Beta	Expected Return
A	.85	9.2%
B	1.08	11.8%
C	1.69	15.3%
D	.71	7.8%
E	2	Po = $25, P1 = $28.46, D1 = $1.50