QUESTION 3: The risk free rate is 10.1% and the market return is 17.5%. STOCK. A. B. C D

BETA 2.6, 1.5, 1, -2.6 - (a) Calculate the required return of each stock using the capital asset pricing model (CAPM). (b) If the expected return of A = 19.50%, B = 16.5%, C = 17.5% and for D = 24.5%, which of the stocks are undervalued, fairly valued or overvalued?

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