Question
From the following data identify the underpriced and overpriced stocks using CAPM approach. Security Expected rate of return Beta A 32 1.5 B 30 2
From the following data identify the underpriced and overpriced stocks using CAPM approach.
| Security | Expected rate of return | Beta |
| A | 32 | 1.5 |
| B | 30 | 2 |
| Stock Index- Market | 12 | 1 |
| Risk free rate | 5 | 0 |
a.
Both are over priced
b.
Cannot be determined
c.
Both are under priced
d.
None
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Sound Investing, Chapter 6 - Valuation Of Assets And Liabilities
Authors: Kate Mooney
1st Edition
0071719288, 9780071719285
