Exercise $2(1\mathrm{.}5$ points$)$

a$.$ Given the following data for a stock: beta $=0\mathrm{.}5$; risk$-$free rate $=4\%$; market rate of return $=12\%$; and Expected rate of return on the stock $=10\%.$ Then the stock is overpriced $\frac{?}{?}$ underpriced $\frac{?}{?}$ or correctly priced? Explain.

b$.$ The correlation coefficient between stock A and the market portfolio is $+0\mathrm{.}6.$ The standard deviation of return of the stock is $30\%$ and that of the market portfolio is $20\%.$ Calculate the beta of the stock.