Question: You are given following information on beta and expected return for each stock: Stock A: beta=0.98, expected return= 0.167. Stock B: beta= 1.12, expected return=

You are given following information on beta and expected return for each stock: Stock A: beta=0.98, expected return= 0.167. Stock B: beta= 1.12, expected return= 0.092. Stock C: beta= 1.56, expected return= 0.181. Stock D: beta= 1.02, expected return= 0.1862. Stock E: beta= 1.14, expected return= 0.109. If the risk free rate of return is 4.2 percent and the market risk premium is 8.9 percent, which one of these stocks is correctly priced according to CAPM?

a. B

b. D

c. A

d. C

e. E

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