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Stock X is priced in the market to give an expected return of 6.1% and has a beta of 0.5. Stock Y has an expected
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Stock X is priced in the market to give an expected return of 6.1% and has a beta of 0.5. Stock Y has an expected return in the market of 13.7% and a beta of 1.2. Stock Z has an expected return in the market of 15.9% and a beta of 1.9. The market risk premium is 7% and the risk-free rate is 4%, Which of these stocks is underpriced in the market?
A. X
B. Y
C. Z
D. Y and Z
E. X and Y
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