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Identify all the following stocks as overpriced, underpriced or fairly valued. For all calculations assume a market risk premium of 5 % and a risk

Identify all the following stocks as overpriced, underpriced or fairly valued. For all calculations assume a market risk premium of 5 % and a risk free rate of 3%. Show all your calculations.

Stock

E(Ri)

(%)

i

Stock classification

(over, under or fairly valued)

A

7.15

3

B

12.08

1.7

C

5.3

1

D

9

1.2

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