Your opinion is that CSCO has an expected rate of return of 0.15.It has a beta of 1.3.The risk-free rate is 0.04 and the market expected rate of return is 0.115.According to the Capital Asset Pricing Model, this security is
A)underpriced.
B)overpriced.
C)fairly priced.
D)Cannot be determined from data provided.
E)None of the options

Question

Quizplus · Accepted Answer

15% - [4% + 1.3(11.5% - 4%)] = 1.25%; therefore, the security is underpriced.

Your Opinion Is That CSCO Has an Expected Rate of Return