StockBetaStandard DeviationExpected ReturnDET0.725%8.0%AIL1.038%10.0%INO1.634%13.5%An analyst has used market- and firm-specific information to make expected return estimates for each stock. The analyst's expected return estimatesmay or may not equal the stocks' required returns.The risk-free rate [TRF] is 6%, and the market risk premium [RPM] is 4%. Use the following graph with the security market line (SML) to plot eachstock's beta and expected return. (Note: Click on the points on the graph to see their coordinates.)2018Stock DET161412Stock AIL10JRN (Percent) 2018Stock DET161412Stock AIL10Stock INO20.20.40.60.81.01.21.41.61.82.0RISK (Beta)A stock is in equilibrium if its required returnits expected return. In general, assume that markets and stocks are in equilibrium(or fairly valued), but sometimes investors have different opinions about a stock's prospects and may think that a stock is out of equilibrium (eitherundervalued or overvalued). Based on the analyst's expected return estimates, stock INO isstock AIL is in equilibrium, andstock DET isRATE OF RETURN (Percent)

In order to find whether the stock price is in equilibrium or not one can use CAPM also known as…

A stock is in equilibrium if its required return v its expected return. In general, assume that markets and stocks are in equilibrium (or fairly valued), but sometimes investors have different opinions about a stock's prospects and may think that a stock is out of equilibrium (either undervalued or overvalued). Based on the analyst's expected return estimates, stock INO is stock AIL is in equilibrium, and stock DET is