Question: The following table summarizes the beta and forecast returns for stock A, B and C The market rate of return is 12 percent and the

The following table summarizes the beta and forecast returns for stock A, B and C The market rate of return is 12 percent

The following table summarizes the beta and forecast returns for stock A, B and C The market rate of return is 12 percent and the risk-free rate is 5 percent. Forecast return 10% 16% 12% Beta 0.85 1.4 1.14 Stock 2.1 Find the required rate of return for stock A, B and C using the capital asset pricing model 2.2 Is the stock correctly priced according to the capital assets pricing model (correctly priced, overvalued or undervalued)? What about the stock B and stock C? If these securities are not correctly priced, what is your investment recommendation (buy, short sale or ignore) for stock A, B and C, respectively

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