The rate of return on short-term UK government securities assumed to be risk-free is 2.5%. The market portfolio with a beta of 1 generates an expected rate of returns of 12%, and beta of the risky asset is 1.15. Suppose the risky asset currently sells at 35 and it is expected to pay 2.50 dividends next year when the asset sells for 36. Is the asset overpriced or underpriced?

a) fairly priced

b) underpriced by 3.425%.

c) overpriced by 3.425%.

d) underpriced by 1.425%