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overvalued vs under valued

estimated rate of return = 13%
expected rate of return for market port = 12%
risk free rate = 3%

if the covariance of the returns on the stock with the returns on the arket portoflio is equal to the variance of the returns on the market portfolio, the analyst's most appropriate conclusion is that the stock is???

undervalued.

Cov(i,M)/Var(M) = Beta = 1

E(R) = 3+ (12-3) = 12
Estimated(R) = 13

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whoops!!!! i totally forgot to subtract the risk free rate from the expected market rate.

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