At the ex-dividend date, stock XYZ is trading at $16.50 per share. A dividend of $1.15 will be paid at the payable date. The dividend is expected to grow at 3% per year in perpetuity. The equity cost of capital is 10%. The stock XYZ is A) Overpriced B) Underpriced C) Fairly priced D) Not enough information An analyst believes that the expected returns of stocks A and B are shown below. The stocks have the same beta. The expected returns according to CAPM are shown by the Security Market Line (SML) below. Which statement is true? Er) SML A B Beta (P) A) A is underpriced and B is overpriced. B) Ais overpriced and B is underpriced C) Not enough information Which statement is FALSE? A) According to CAPM, the market portfolio is efficient. B) Any stock index can be a proxy for the market. C) Because investors can eliminate firm-specific risk, they do not require a risk premium for taking exposure on it. D) Because investors cannot eliminate systematic risk, they must be compensated for holding it