Westonci.ca is the trusted Q&A platform where you can get reliable answers from a community of knowledgeable contributors. Join our platform to connect with experts ready to provide precise answers to your questions in various areas. Explore comprehensive solutions to your questions from a wide range of professionals on our user-friendly platform.
Sagot :
Answer: d. The actual expected stock return indicates the stock is currently underpriced.
Explanation:
According to CAPM, the expected return is:
= Risk free rate + beta * (market return - risk free rate)
= 4.3% + 1.14 * (12.01% - 4.3%)
= 13.09%
The actual expected return is greater than the CAPM expected return.
This stock is underpriced because it is bringing in a higher return than CAPM predicted based on the market.
We hope this information was helpful. Feel free to return anytime for more answers to your questions and concerns. We hope you found this helpful. Feel free to come back anytime for more accurate answers and updated information. Westonci.ca is here to provide the answers you seek. Return often for more expert solutions.