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Security X has an expected rate of return of 10% and a beta of 1.22. The risk-free rate is 5% and the market expected rate
Security X has an expected rate of return of 10% and a beta of 1.22. The risk-free rate is 5% and the
market expected rate of return is 15%. According to the capital asset pricing model, is the security
overpriced or underpriced and is the alpha positive or negative?
O underpriced; negative
O overpriced; negative
O overpriced; positive
O underpriced; positive
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