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Stock Y has a beta of 1.3 and an expected return of 12.5 percent. Stock Z has a beta of 0.7 and an expected return

Stock Y has a beta of 1.3 and an expected return of 12.5 percent. Stock Z has a beta of 0.7 and an expected return of 7.1 percent. If the risk-free rate is 2 percent and the market risk premium is 7.5 percent. a. Are these stocks correctly priced? If not, are they underpriced or overpriced? b. What would the risk-free rate have to be for the two stocks to be correctly priced?

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