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Let there are two stocks: Stock A and Stock B. The expected returns of Stock A and Stock B are 18% and 10.5% respectively. The
Let there are two stocks: Stock A and Stock B. The expected returns of Stock A and Stock B are 18% and 10.5% respectively. The beta of Stock A and Stock B are 1.50 and 0.80 respectively. Suppose the risk-free rate of return is 5.5% and the market risk premium is 7.5%. Which of the following statements is most correct? | ||
0 | I do not want to answer this Question | |
1 | Stock A is over-priced and Stock B is under-priced. | |
2 | Stock B is over-priced and Stock A is under-priced. | |
3 | Both the Stock A and Stock B are over-priced. | |
4 | Both the Stock A and Stock B are under-priced. |
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