Question: Consider the graph below, and assume the CAPM and SML are valid. Match the following items. You will not use all right-side matches, and it's

Consider the graph below, and assume the CAPM and SML are valid. Match the following items. You will not use all right-side matches, and it's possible that you might use right-side matches more than once.

Consider the graph below, and assume the CAPM and SML are valid.

E(R) SML .18 .17 .16 .15 .14 .13 .12 .11 .10 .09 .08 .07 .06 .05 04 .03 .02 .01 .00 Stock A Stock B Beta .25 .50 .75 1.00 1.25 1.50 1.75 2.0 Stock A is currently... [Choose ] [Choose] The reward-to-risk ratio for Stock A is... 7% 9% The expected market return is... 8% 13% The Market Risk Premium is... underpriced correctly priced 10% The risk-free rate is... 12% overpriced The expected return on Stock B should be... 4% Stock B is currently... 6% [Choose ]

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