Use this info to answer the next five questions Return on Stock A (%) Return on Market (%) -5.0 8.5 2011 2012 2013 2014 -10 5.5 9.1 -2.5 5.9 -4.3 Beta ? ? Expected Return ? ? What are the betas of stock A and market? Beta of Stock A = 0.76, Beta of Market = 0 Beta of Stock A = 0.95, Beta of Market = 0 Beta of Stock A = 1.10, Beta of Market = 1 Beta of Stock A = 1.15, Beta of Market = 1 What are the expected returns of stock A and market? Expected Return on Stock A = 0.53%, Expected Return on Market = 1.28% Expected Return on Stock A = 1.53%, Expected Return on Market = 1.15% Expected Return on Stock A = 2.52%, Expected Return on Market = 1.38% Expected Return on Stock A = 3.53%, Expected Return on Market = 2.28% Based on CAPM, what is the true return of stock A if the T-bill rate is 0.50% using the average return on market found from previous question? 2.541% 3.257% 1.358% 1.657% Which of the following is correct regarding the value of Stock A based on CAPM return and expected returns found from previous questions? Stock A is undervalued since it is plotted above SML. Stock A is overvalued since it is plotted below the SML. Stock A is overvalued since it is plotted above the SML. Stock A is undervalued since it is plotted below SML