Under/Over Valued Stock A manager believes his firm will earn a 12.40 percent return next year. His firm has a beta of 1.46, the expected return on the market is 9.6 percent, and the risk-free rate is 4.6 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.

	18.616%, over-valued
	11.90%, under-valued
	18.616%, under-valued
	11.90%, over-valued