Expected Return = 17.75%
CAPM Return =
= 8% + 1.25 (15% - 8%)
= 16.75%
Expected Raturn > CAPM Return by 17.75% - 16.75% = 1%
Stock is undervalued by 1%
Option D is correct.
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+ 34. An analyst collects the following data: Expected market return 15% Risk free rate 8%...
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