Alex holds a portfolio that is invested equally in three stocks. An analyst has used market and firm-specific information to make expected return estimates for each stock. Each stock is described in the following table: Stock PPO RRT Beta Expected Return 16% 0.4 8% 1.2 14% WYY The risk-free rate, Ry, is 8 percent and the market return, R. 13 percent. The line given on the following graph represents the security market line (SML), which is derived from the CAPM equation: R = R + B, (R. - R). Use the following graph with the security market line to plot each stock's beta and expected return. (Note: Click the points on the graph to see their coordinates.) 20 18 PPO 95 A 14 12 RRT RATE OF RETURN (Percent) 10 WYY 6 2 0 02 04 06 14 16 18 20 08 1012 RISK (Beta) Sometimes investors have different opinions about a stock's prospects and may think that a stock is ether undervalued or overvalued. Determine the required rate of return for each stock, and then use the analyst's expected retur estimates to determine whether he thinks each stock in Alex's portfolio is undervalued, overvalued, or fainly valued. Required Rate of Return (Percent) Valuation Stock PPQ RRT WYY