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Q#25 The beta of Ricci Co.'s stock is 2.8, whereas the risk-free rate of return is...

Q#25

The beta of Ricci Co.'s stock is 2.8, whereas the risk-free rate of return is 8 percent. If the expected return on the market is 17 percent, then what is the expected return on Ricci Co.? Suppose this stock has an expected return of 40%. Is this security properly priced?

A) 42.80%, overpriced
B) 33.20%, overpriced
C) 42.80%, underpriced
D) 33.20%, underpriced

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