You have observed the following returns over time:
Year
Stock X
Stock Y
Market
2006
13%
14%
14%
2007
18
5
9
2008
-13
-7
-12
2009
4
3
2
2010
21
12
17
Assume that the risk-free rate is 3% and the market risk premium is 14%
What is the beta of Stock X? Round your answer to two decimal places.
I. Stock Y is undervalued, because its expected return is below its required rate of return.II. Stock X is overvalued, because its expected return exceeds its required rate of return.III. Stock X is undervalued, because its expected return its exceeds required rate of return.IV. Stock Y is undervalued, because its expected return exceeds its required rate of return.V. Stock X is undervalued, because its expected return is below its required rate of return.
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