Given the following information: The risk-free rate is 7%, the beta of stock A is 1.2, the beta of stock B is 0.8, the expected return on stock A is 13.5%, and the expected return on stock B is 11.0%. Further, we know that stock A is fairly priced and that the betas of stocks A and B are correct. Which of the following regarding stock B must be true?
A) Stock B is also fairly priced.
B) The expected return on stock B is too high.
C) The expected return on stock A is too high.
D) The price of stock B is too high.
E) The price of stock A is too high.

Question

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The Answer of Given the following information: The risk-free rate is 7%, the beta of stock A is 1.2, the beta of stock B is 0.8, the expected return on stock A is 13.5%, and the expected return on stock B is 11.0%. Further, we know that stock A is fairly priced and that the betas of stocks A and B are correct. Which of the following regarding stock B must be true?
A) Stock B is also fairly priced.
B) The expected return on stock B is too high.
C) The expected return on stock A is too high.
D) The price of stock B is too high.
E) The price of stock A is too high.

Given the Following Information: the Risk-Free Rate Is 7%, the Beta