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You are considering two stocks: ABC and XYZ. ABC has a beta of 1.25 while XYZ has a beta of .65. The risk free rate
You are considering two stocks: ABC and XYZ. ABC has a beta of 1.25 while XYZ has a beta of .65. The risk free rate is 3% and the expected return on the market is 10%. You have analyzed the two companies and believe that ABC will earn a return of 10% next year while XYZ will earn a return of 7%. Based on your analysis, which of the stocks are overvalued?
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