The risk-free rate is 7% and the expected rate of return on the market portfolio is 12%.

a.	Calculate the required rate of return on a security with a beta of 1.96. (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 15%, is it overpriced or underpriced?

	Overpriced
	Underpriced