You are analyzing a common stock with a beta of 1.5. The risk-free rate of itnerest is 5 percent and the expected return on the market is 15 percent. If the stock's return based on its market price is 21.5%,

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.