You are analyzing a stock with a beta of 2.9. The risk-free rate of interest is 3 percent and the market risk premium is 8 percent.

A. What is the stocks equilibrium required rate of return?

B. If the expected return based on market price is 17.5%, is the stock over, under, or correctly valued?

C. What is the expected return on the market?

Answers:

A. 26.2%

B.Undervalued

C. 11%

I already know the answers to the question. I just need someone to walk me through the solution.