An analyst expects a risk-free return of 4.5 percent, a market return of 14.5 percent, and the returns for Stocks A and B that are shown in the following table. STOCK INFORMATION Stock Beta A 1.2 Analyst's Estimated Return 16% B 0.8 14% a. Show on the graph provided in the answer book: (1) Where Stock A and B would plot on the security market line (SML) if they were fairly valued using the capital asset pricing model (CAPM) (2) Where Stock A and B actually plot on the same graph according to the returns estimated by the analyst and shown in the table [6 minutes] b. State whether Stock A and B are undervalued or overvalued if the analyst uses the SML for strate- gic investment decisions. [4 minutes]