Alanna Chandler

Business

19 December, 18:48

Stock Y has a beta of 1.59 and an expected return of 25%. Stock Z has a beta of 0.44 and an expected return of 12%. If the risk free rate is 6% and the market risk premium is 11.3%. Which of the following statements is correct:

a. Stock Y and stock Z are correctly priced

b. Stock Y is underpriced and stock Z is overpriced

c. Stock Y is overpriced and Stock Z is underpriced

d. Both stock Y and stock Z are underpriced

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