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The risk-free rate is 3.5% and the market risk premium is 7.5%. Stock A has a beta of 1.1 and an expected return of 12%.

The risk-free rate is 3.5% and the market risk premium is 7.5%.

Stock A has a beta of 1.1 and an expected return of 12%.

Stock B has a beta of .92 and an expected return of 10.25%.

Are these stocks correctly priced? Why or why not?

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