Question: Brady Enterprises beta is 1 . 2 0 , the risk - free rate is 3 % , and the forecasted return on the market

Brady Enterprises beta is 1.20, the risk-free rate is 3%, and the forecasted return on the market is 10%. Brady Enterprise expected return is 13%.
a. Calculate the required return for Brady Enterprise.
b. Comparing expected and required returns, determine whether Brady Enterprise is over/underpriced and what must happened to the price of the stock.
c. Using the CAPM approach, draw and label the SML. On the same graph, illustrate (draw) a decrease in market risk aversion because the market risk premium falls

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