overvalued vs under valued stock, market, returns, conclusion, expected

kseniaru

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???

nitoha

undervalued.

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

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

LokiDog2

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