A stock with a beta of 1.2 provides 15% return. The risk-free rate is 3%. The return
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A stock with a beta of 1.2 provides 15% return. The risk-free rate is 3%. The return on the market portfolio is 12%. Compute the expected return according to the Capital Asset Pricing Model (CAPM). Compare this predicted return to the actual return and comment whether the stock is overvalued or undervalued.
Related Book For
Corporate Finance Core Principles And Applications
ISBN: 9781260571127
6th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
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