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An investor is considering investing in Stock FM which has a Beta of 1.0 and an estimated return of 16%. If the risk-free rate and

An investor is considering investing in Stock FM which has a Beta of 1.0 and an estimated return of 16%.

If the risk-free rate and the market risk premium are 3% and 10% respectively, what will be the expected return for Stock FM according to the Capital Asset Pricing Model?

Given the information above, is Stock FM correctly priced according to the Capital Asset Pricing Model? Why or why not? Explain what is likely to happen to Stock FM

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