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You are analyzing a stock that has a beta of 0.8. The risk-free rate is 3% and the market risk premium is expected to be

You are analyzing a stock that has a beta of 0.8. The risk-free rate is 3% and the market risk premium is expected to be 7%. Currently, the stock is priced to have a return of 8.6%.

You should (BUY / NOTBUY) this stock because it plots (BELOW / ON / ABOVE) the Security Market Line (SML) and is (OVER / FAIRLY / UNDER) priced.

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