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Stock Y has a beta of 1.5 and an expected return of 14.2 percent. Stock Z...

Stock Y has a beta of 1.5 and an expected return of 14.2 percent. Stock Z has a beta of 0.85 and an expected return of 10.7 percent.

   

Required:

If the risk-free rate is 4.6 percent and the market risk premium is 7.1 percent, are these stocks correctly priced?

    

  Stock Y undervalued or overvalued?  
  Stock Z undervalued or overvalued?  


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