QUESTION $8$

The risk$-$free rate is $7\%.$ The expected market rate of return is $16\%.$ If you expect a stock with a beta of $1\mathrm{.}2$ to offer a rate of return of $15\%,$ you should

a$.$ buy the stock because it is underpriced.

b$.$ buy the stock because it is overpriced.

c$.$ sell short the stock because it is overpriced.

d$.$ sell the stock short because it is underpriced.