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The expected rates of return for Stock A, Stock B, and the Market portfolio are .10, .15, and .12 respectively. The betas for Stock A

The expected rates of return for Stock A, Stock B, and the Market portfolio are .10, .15, and .12 respectively. The betas for Stock A and Stock B are .5 and 2.0 respectively. The risk-free rate is .05. Which of the following statements is true?

Stock B is over-priced.

b. The market risk premium is .09

c. Stock B is priced in equilibrium.

d. Stock A is over-priced.

e. Both Stocks A and B are under-priced

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