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The expected market rate of return is 12%, the risk-free rate is 3%. Stock A has a beta of 1.3 . If stock A is
The expected market rate of return is 12%, the risk-free rate is 3%. Stock A has a beta of 1.3 . If stock A is priced to yield a rate of return of 16% (expected return), then:
a. Stock A is overpriced
b. Stock A is underpriced
c. Stock A lies on the SML
d. Stock A lies below the SML
e. Stock A is fairly priced
I know the answer but I dont know how to get the answer please show work
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