Question: CAPM and Security Pricing Stock A has an expected return of 30% and a beta of 2.5. Stock B has an expected return of 30%

CAPM and Security Pricing Stock A has an expected return of

CAPM and Security Pricing Stock A has an expected return of 30% and a beta of 2.5. Stock B has an expected return of 30% and a beta of 2.5 when the risk free rate is 7% Which of the following statements are correct? I. Stock A is underpriced relative to Stock B II. Stock B is underpriced relative to Stock A III. This situation is inconsistent with the CAPM IV. This situation is consistent with the CAPM Multiple Choice 1 0 I and III only l and I only 0 II and III only and in only 0 ll and IV only ) I and IV only

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