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Under/Over Valued Stock A manager believes his firm will earn a 10.90 percent return next year. His firm has a beta of 1.36, the expected
Under/Over Valued Stock A manager believes his firm will earn a 10.90 percent return next year. His firm has a beta of 1.36, the expected return on the market is 8.6 percent, and the risk-free rate is 3.6 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. 10.40%, over-valued 15.296%, over-valued 15.296%, under-valued 10.40%, under-valued
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