The CAPM-based return of stocks A, B, and C are estimated to be 12%, 15%, and 17
ID: 2726937 • Letter: T
Question
The CAPM-based return of stocks A, B, and C are estimated to be 12%, 15%, and 17%,respectively. The actual or expected returns on stocks A, B, and C are 10%, 17%, and 15%.
Which of the following statements about the pricing of stocks A, B, and C is correct?
Stocks A, B, and C are correctly priced.
Stocks A, B, and C are underpriced, overpriced, and overpriced, respectively.
Stocks A, B, and C are overpriced, underpriced, and overpriced, respectively.
Stocks A, B, and C are underpriced, overpriced, and underpriced, respectively.
1.Stocks A, B, and C are correctly priced.
2.Stocks A, B, and C are underpriced, overpriced, and overpriced, respectively.
3.Stocks A, B, and C are overpriced, underpriced, and overpriced, respectively.
4.Stocks A, B, and C are underpriced, overpriced, and underpriced, respectively.
Explanation / Answer
Stocks A, B, and C are overpriced, underpriced, and overpriced, respectively.
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