John Wilson, a portfolio manager, is evaluating the expected performance of two common stocks, Furhman Labs, Inc.,

Question:

John Wilson, a manager, is evaluating the expected performance of two common Furhman Labs, Inc., and Garten Testing, Inc. The risk-free rate is 5 percent, the on the market is 11.5 percent, and the betas of the two are 1.5 and .8, respectively. Wilson's own forecasts of the returns on the two are 13.25 percent for Furhman Labs and 11.25 percent for Garten. Calculate the required return for each stock. Is each stock undervalued, fairly valued, or overvalued?

Stocks
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The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...