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Q3) You are considering investing in stock S and you want to know how stock S is related to the market portfolio M. Given your

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Q3) You are considering investing in stock S and you want to know how stock S is related to the market portfolio M. Given your research, you discovered the following information Expected Return Standard Deviation Stock S Market M Risk Free 0.150 0.120 0.020 0.250 0.200 Correlation (S, M) 0M0) a) b) What is the exposure of stock S to market risk? (3 points) Discuss whether according to the CAPM stock S is overvalued, undervalued or fairly valued. (2 points) What is the level of systematic and idiosyncratic risk for stock S? (5 points) c)

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