The risk-free rate is 4% and the expected rate of return on the market portfolio is 9%.

a. Calculate the required rate of return on a security with a beta of 1.28. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Required Return _______%

b. If the security is expected to return 12%, is it overpriced or underpriced? Underpriced or Overpriced