Question: You are considering two stocks: A and B Based on your analysis, you believe that stock A will earn a return of 10% and stock

You are considering two stocks: "A" and "B" Based on your

You are considering two stocks: "A" and "B" Based on your analysis, you believe that stock "A" will earn a return of 10% and stock "B" will earn a return of 8% next year. The beta of stock A is 12, while the beta of B is 0.8. The risk-free rate is 2 percent and the market risk premium is equal to 7 percent. Assuming that both stocks have been priced using CAPM. Which of the following choices is correct? O a. Stock A is undervalued, while stock B is fairvalued. ob. Both stocks are undervalued Oc. Stock A is undervalued, while stock B is overvalued. Od. Both stocks are overvalued Oe. Stock A is overvalued, while stock B is undervalued

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