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According to the CAPM, which one of the following stocks is correctly priced if the risk-free rate of return is 2.5%, the market risk premium
According to the CAPM, which one of the following stocks is correctly priced if the risk-free rate of return is 2.5%, the market risk premium is 8%, and the stocks have the expected returns given below at their current price?
Stock | Beta | Expected Return |
A | .68 | 8.2% |
B | 1.42 | 13.9% |
C | 1.23 | 11.8% |
A. | A | |
B. | B | |
C. | C | |
D. | Both B & C | |
E. | Both A & C |
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