Which one of the following stocks, if any, is correctly priced according to capm if the risk-free rate of return is 6.5 percent and the market rate of return is 10.5 percent? stock a with a beta of .85 and an expected return of 9.22 percent; stock b with a beta of 1.08 and an expected return of 11.90 percent; stock c with a beta of 1.69 and an expected return of 15.38 percent; stock d with a beta of 1.45 and an expected return of 12.30 percent.

Stock D

12.30% this stock is correctly priced according to CAPM

Explanation:

We will calculate the Capital Assets Pricing Model (CAPM) for each stock

All have the same risk-free rate and market-rate. We change the beta for each Stock:

CAPM:

risk free0.065

market rate0.105

premium market= (market rate - risk free) =0.04

Stock A

beta(non diversifiable risk)0.85  

Ke0.099009.22% this stock is no correctly priced.

Stock B

beta(non diversifiable risk)1.08

Ke0.10820 10.82% this stock is no correctly priced.

Stock C

beta(non diversifiable risk)1.69

Ke0.13260   13.26% this stock is no correctly priced.

Stock D

beta(non diversifiable risk)1.45

Ke0.12300 12.30% this stock is correctly priced according to CAPM

i this its 7 years i hope this

answer; blank (1) hrm specialists,blank(2); line managers;