Consider the following information about two stocks X and Y.

X's expected return is 0.18, standard deviation is 0.06, covariance with market portfolio is 0.00108.

Y's expected return is 0.12, standard deviation is 0.02, covariance with market portfolio is 0.00036.

what is the empirical or estimated beta for each stock?

a. 1.43 0.57

b. 0.36 0.012

c. 1.2 0.4

d. 1.2 4

e. 3.6 1.2

based on the information above, which of the following is correct?

a. both securities are by priced according to equilibrium

b. both securities are overvalued, so sell both

c. both securities are overvalued, so buy both

d. both securities are undervalued, so invest both

e. both securities are undervalued, so sell both

Concider stocks X and Y Stock X, Expected Return 0.18, Standard Deviation 0.06, Covariance with market portfolio 0.00108 Stock Y, Expected Return 0.12, Standard Deviation 0.02, Covariance wht market portfolio 0.00036 The correlation between stocks X an Y is 0.2 and the risk-free rate of return is 8%. The market risk premium is 7% and the market porfolio has a standard deviation of 3%