the market risk premium is 7 percent and the risk-free rate of return is 3 percent. Lexant stock has 10 percent less systematic risk than the market and has an actual return of 12 percent.

a) Explain whether this stock is overpriced, underpriced, or fairly priced.

b) Explain whether this stock is above / below or on the SML

c) is the stock in equilibrium? If yes, explain why. If no, describe the dynamics how the stock will go back to equilibrium.