Q4) 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) 15% 25% Market (M) 12% 20% Risk-free 2% Correlation of S and M 40% a) What is the exposure of stock S to market risk? (3 points) b) Discuss whether according to the CAPM, stock S is overvalued, undervalued or fairly valued. (2 points) c) What is the level of systematic and idiosyncratic risk for stock S? (5 points) Q4) 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) 15% 25% Market (M) 12% 20% Risk-free 2% Correlation of S and M 40% a) What is the exposure of stock S to market risk? (3 points) b) Discuss whether according to the CAPM, stock S is overvalued, undervalued or fairly valued. (2 points) c) What is the level of systematic and idiosyncratic risk for stock S? (5 points)