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The expected rates of return for stock a stock b and the

The expected rates of return for Stock A, Stock B, and the Market portfolio are .10, .15, .12, respectively. The betas for Stock A and Stock B are .5, and 2.0 respectively. The risk – free rate is .05. Which of the following statements is true?

a. Stock A is over – priced b. Stock B is over – priced c. Both Stock A and B are under – priced d. Stock B is at equilibrium e. The market risk premium is .09

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Financial Management: The expected rates of return for stock a stock b and the

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Financial Management: The expected rates of return for stock a stock b and the

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