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Stock A has an expected return of 12%, a beta of 1.2, and a standard deviation of 20%. Stock B also has a beta of

Stock A has an expected return of 12%, a beta of 1.2, and a standard deviation of 20%. Stock B also has a beta of 1.2, but its expected return is 10% and its standard deviation is 15%. Portfolio AB has $900,000 invested in Stock A and $300,000 invested in Stock B. The correlation between the two stocks' returns is zero. Which of the following statements is CORRECT: Portfolio AB's standard deviation is 17.5% The stocks are not in equilibrium based on the CAPM. If A is valued correctly, thn B is overvalued The stocks are not in equilibrium based on the CAPM. If A is valued correctly, thn B is undervalued Portfolio AB's expected return is 11.0% Portfolio AB's beta is less than 1.2

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