The expected return for the market is 9 percent and the risk-free rate is 3 percent. The following information is estimated for each of two stocks. Stock Beta R (%) 1 0.7 7.0 2 1.4 11.0 Assume that an investor, using fundamental analysis, develops the estimated returns for these stocks. Based on the investor's estimates, which stock(s) is(are) undervalued? A. stock 1 B. stock 2 C. both stocks D. neither stock

stock	Beta	R%
1	0.7	7.0
2	1.4	11.0