Question: The following table contains information based on analysts' forecasts for three stocks. Assume at-bill rate of 4% and S&P500 returns of 12%. Stock Today's Price

The following table contains information based on analysts' forecasts for three stocks. Assume at-bill rate of 4% and S&P500 returns of 12%.

Stock Today's Price Expected Price in 1 Year Expected Dividen in 1 Year Beta
A 20.00 21.00 1.00 1.0
B 30.00 33.00 1.50 0.75
C 14.22 16.00 0.50 1.5

a) Compute the expected return and the required return on each stock and determine whether each stock is undervalued, overvalued, or fairly valued.

b) Outline an appropriate trading strategy using the available information and the results generated. Include graphical analysis.

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