Finance The risk-free rate is 3.7 percent and the expected return on the market is 12.3 percent. Stock A has a beta of 1.1 and an expected return of 13.1 percent. Stock B has a beta of .86 and an expected return of 11.4 percent. Are these stocks correctly priced? Why or why not? Use E(Ri) = Rf + βi(E(RM) − Rf).
Finance The risk-free rate is 3.7 percent and the expected return on the market is 12.3 percent. Stock A has a beta of 1.1 and an expected return of 13.1 percent. Stock B has a beta of .86 and an expected return of 11.4 percent. Are these stocks correctly priced? Why or why not? Use E(Ri) = Rf + βi(E(RM) − Rf).
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 13P
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Finance
The risk-free rate is 3.7 percent and the expected return on the market is 12.3 percent. Stock A has a beta of 1.1
and an expected return of 13.1 percent. Stock B has a beta of .86 and an expected return of 11.4 percent. Are
these stocks correctly priced? Why or why not? Use E(Ri) = Rf + βi(E(RM) − Rf).
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