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Stock A is currently earning a return of 10% and has a beta of 0.75, whilst Stock B is earning 15% and has a beta
Stock A is currently earning a return of 10% and has a beta of 0.75, whilst Stock B is earning 15% and has a beta of 1.5. The rate of return on the market is 12% and a risk free asset yields 5%. Then you can conclude that:
A. Stocks A and B are earning equilibrium returns
B. Stock A is overpriced and stock B is underpriced
C. Stock A is underpriced and stock B is overpriced
D. Socks A and B are underpriced
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