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Question 2 You plan to invest part of your savings and are examining the following data: Expected return Beta Yield to maturity on 10-year government

Question 2 You plan to invest part of your savings and are examining the following data: Expected return Beta Yield to maturity on 10-year government bonds 2% Stock A 20% 1.3 Stock B 9% 1.1 Stock C 7% 0.5 Portfolio D 10% 1.0 (a) If only Portfolio D is correctly priced, are stocks A, B and C correctly priced? If not, what investment action would you recommend for each stock to take advantage of the price anomaly? (10 marks)

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