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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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