Under$/$Over Valued Stock A manager believes his firm will earn a $17\mathrm{.}3$ percent return next year. His firm has a beta of $1\mathrm{.}63,$ the expected return on the market is $15\mathrm{.}3$ percent, and the risk$-$free rate is $5\mathrm{.}3$ percent. Compute the return the firm should earn given its level of risk and determine whether the manager is saying the firm is under$-$valued or over$-$valued.

Multiple Choice

$21\mathrm{.}6\%,$ over$-$valued

$25\mathrm{.}939\%,$ under$-$valued

$25\mathrm{.}939\%,$ over$-$valued

$21\mathrm{.}6\%,$ under$-$valued