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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

  1. 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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