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Suppose that the risk-free rate is 3% and the expected return on the market portfolio is 10%. A certain stock has a beta of 1.0.

Suppose that the risk-free rate is 3% and the expected return on the market portfolio is 10%. A certain stock has a beta of 1.0. You believe that over the next year this stock will produce a return of 11%. Would you say that the stock is overpriced or underpriced?

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