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Stocks A, B, and C have two risk factors with the following beta coefficients. The zero-beta return (lo) = .025 and the risk premiums for

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Stocks A, B, and C have two risk factors with the following beta coefficients. The zero-beta return (lo) = .025 and the risk premiums for the two factors are (11) = 12 and (12) = .10. Stock Factor 1 bin Factor 2 b12 A -0.25 1.1 B -0.05 0.9 0.01 0.06 Suppose that you know that the prices of stocks A, B, and C will be $10.95. 22.18, and $30.89, respectively. Based on this information Stock a is overvalued, stock bis overvalued, stock c is undervalued All three stocks are undervalued Stock a is undervalued, stock bis properly valued, stock c is overvalued. Stock a is undervalued, stock bis properly valued, stock c is undervalued

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