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Assume that the expected return on the market portfolio is 1 5 % and that the risk - free rate is 5 % . Assuming

Assume that the expected return on the market portfolio is 15% and that the risk-free rate is 5%. Assuming that the CAPM holds, compute the alpha of a stock with an expected return of 17% and a beta of 1.2 and explain whether the stock is correctly priced, underpriced or overpriced.
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