Home Interior's stock has an expected return of 12.89 percent and a beta of 1.28. The market return is 10.7 percent and the risk-free rate is 2.8 percent. This stock is _____ because the CAPM return for the stock is _____ percent.
A) greatly overvalued; 16.50
B) slightly overvalued; 12.91
C) priced correctly; 12.89
D) slightly undervalued; 12.91
E) greatly undervalued; 16.50

Question

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The Answer of Home Interior's stock has an expected return of 12.89 percent and a beta of 1.28. The market return is 10.7 percent and the risk-free rate is 2.8 percent. This stock is _____ because the CAPM return for the stock is _____ percent.
A) greatly overvalued; 16.50
B) slightly overvalued; 12.91
C) priced correctly; 12.89
D) slightly undervalued; 12.91
E) greatly undervalued; 16.50

Home Interior's Stock Has an Expected Return of 12