Stock y has a beta of 13 and an expected return of 185


Stock Y has a beta of 1.3 and an expected return of 18.5%. Stock Z has a beta of 0.70 and an expected return of 12.1%. If the risk-free rate is 8% and the market risk premium is 7.5%, are these stocks correctly priced? If not, what would the risk-free rate have to be for the two stocks to be correctly priced?

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Financial Management: Stock y has a beta of 13 and an expected return of 185
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