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A stock with a beta of 1.2 provides 15% return. The risk-free rate is 3%. The return on the market portfolio is 12%. Compute the

A stock with a beta of 1.2 provides 15% return. The risk-free rate is 3%. The return on the market portfolio is 12%. Compute the expected return according to the Capital Asset Pricing Model (CAPM). Compare this predicted return to the actual return and comment whether the stock is overvalued or undervalued.

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