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If the market expected return is 11% and the risk-free rate is 2%, which of the following stock(s) is/are overpriced according to the CAPM? If
If the market expected return is 11% and the risk-free rate is 2%, which of the following stock(s) is/are overpriced according to the CAPM? If a portfolio consists of 30% of each stock and 10% of a market index, what should the portfolios expected return be if the CAPM holds?
Current price Expected 1-yr forward price Beta
Stock A $20 $27.5 3
Stock B $30 $33 0.6
Stock C $40 $48 2
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