You are analyzing a common stock with a beta of 1.5. The risk-free rate of interest is 5 percent and the market risk premiumis 10percent. If the stock's expected return based on its market price is 19.5%,

• the stock is overvalued since the expected return is above the SML.
• the stock is undervalued since the expected return is above the SML.
• the stock is correctly valued since the expected return is above the SML.
• the stock is overvalued since the expected return is below the SML.
• the stock is undervalued since the expected return is below the SML.