Stock	Beta	Expected returns
A	1.1	10.50%
B	0.8	7.80%
C	0.7	7.10%
D	1.3	12.20%
E	1.5	14.48%

Assume that there are two securities which are not correctly priced. Which are they? Are they over-priced or under-priced?

b. Given the following information for Company D, find the WACC. Assume the companys tax rate is 25 percent.

1. Debt: 5,600 (23) percent coupon bonds outstanding, $1,000 par value, 2 years to maturity, selling for 120 percent of par; the bonds make quarterly payments.
2. Common stock: 100,000 shares outstanding, selling for $36 per share; the beta is 1.2.
3. Preferred stock: 15,000 shares of 8 percent preferred stock outstanding (par value of $100), currently selling for $72 per share (par value of $100).
4. Market: 13 percent market returns and 3 percent risk-free rate.