For the next two questions, here are the data on two companies. The T-bill rate is 3% and the market risk premium is 6.5%

Company	$5 Below Store	Everything $1 store
Forecasted Return	12%	6%
Standard Deviation of Return	5%	6%
Beta	1.2	0.75

What would be the expected return for each company, according to the CAPM?

	9.85% for $5 below store and 10.38% for Everything $1 store
	15.88% for $5 below store and 12.22% for Everything $1 store
	10.80% for $5 below store and 7.88% for Everything $1 store
	12.25% for $5 below store and 10.38% for Everything $1 store

Which of the following is correct regarding the company's stock value?

	$5 below store is overvalued because the forecasted return is lower than CAPM return.
	$5 below store is undervalued because the forecasted return is higher than CAPM return.
	Everything $1 store is overvalued because the forecasted return is higher than CAPM return.
	Everything $1 store is undervalued because the forecasted return is equal to the CAPM return.