Presently, the risk-free rate is 10 percent (Rf )and the expected return on the market portfolio (E(Rm))is 15 percent. Market analysts return expectations for four stocks are listed here, together with each stocks expected beta.

If the analysts expectations are correct, which stocks (if any) are overvalued? Which (if any) are undervalued?

(Hint: You need to calculate the required return on each stock.

Show all of your calculations with appropriate explanation.

		Expected	Expected	Required	Choose
Stock		Return	Beta	Return (CAPM)	Under? Over? Or Correctly Priced?
1.Stillman Zinc Corp.		17.00%	1.3
2.Union Paint Co.		14.5	0.8
3.National Auto Co.		15.5	1.1
4.Parker Electronics, Inc		18	1.7