Question: Show all work + formulas for full credit. (A.) Stock Z has a beta of 2. Treasury Bills currently return 2%, and the average return

Show all work + formulas for full credit.

Show all work + formulas for full credit. (A.) Stock Z has

(A.) Stock Z has a beta of 2. Treasury Bills currently return 2%, and the average return on the S&P 500 for the last 20 years has been 7%. What is the expected return for Stock Z? Graph the security market line and Stock Z. Label all relevant details. What does beta (8) represent? (B.) (Stock Z pays no dividends and is currently trading at $950 per share. Stock Z is forecasted to have a stock price of $850 in 1 year. What is the forecasted rate of return for Stock Z? Based on your response in part (A), is Stock Z underpriced, overpriced, or correctly priced? Justify your reasoning mathematically and update Stock Z in your graph for part (A)

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