Stock A has a beta of 1.25 and an expected return of 14 percent. The risk-free rate is 4 percent and the expected return on the market portfolio is 13 percent. This stock is _____ because the CAPM return for the stock is _____ percent.

a.

overpriced; 14.75

b.

underpriced; 11.25

c.

underpriced; 15.25

d.

overpriced; 15.25