Suppose you invested in stock WMT, which has following information: Beta = 0.85; risk-free rate = 4

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Suppose you invested in stock WMT, which has following information: Beta = 0.85; risk-free rate = 4 percent; market rate of return = 12 percent. However, based on the stock price, this stock actually gives 12 percent return.

What should be the return of this stock? Is it underpriced or overpriced? How?

Related Book For answer-question

Fundamentals of Financial Management

ISBN: 978-0324302691

11th edition

Authors: Eugene F. Brigham, ? Joel F. Houston

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Posted Date: Jun 10, 2023 07:54 AM

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Suppose you invested in stock WMT, which has following information: Beta = 0.85; risk-free rate = 4

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Expert Answer:

To determine the expected return of the stock WMT we can use the capital asset pricing model CAPM wh... View the full answer

Fundamentals of Financial Management

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