Stock A has a beta of 1.2 and Stock B has a beta of 0.8. The expected return of Stock A is 11.1% and the expected return of Stock B is 7.85%. The risk-free interest rate is 2% and the market premium is 7.2%. Are the stocks priced correctly? Which one is more expensive than the other?

Answer rating: 100% (QA)

To determine if the stocks are priced correctly we can compare their expected returns with ... View the full answer