Which One of the Following Stocks,if Any,is Correctly Priced According

question 6

Multiple Choice

Which one of the following stocks,if any,is correctly priced according to CAPM if the risk-free rate of return is 6.5 percent and the market rate of return is 10.5 percent? Stock A with a beta of .85 and an expected return of 9.22 percent;Stock B with a beta of 1.08 and an expected return of 11.90 percent;Stock C with a beta of 1.69 and an expected return of 15.38 percent;Stock D with a beta of 1.45 and an expected return of 12.30 percent.

• A)Stock A
• B)Stock B
• C)Stock C
• D)Stock D
• E)None of the stocks are correctly priced according to CAPM.

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