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The risk-free rate is 5%. The expected market rate of return is 11%. If you expect stock X with a beta of 2.1 to offer
The risk-free rate is 5%. The expected market rate of return is 11%. If you expect stock X with a beta of 2.1 to offer a rate of return of 15%, you should
A. buy stock X because it is overpriced.
B. sell short stock X because it is overpriced.
C. sell short stock X because it is underpriced.
D. buy stock X because it is underpriced.
E. None of the options, as the stock is fairly priced.
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