Nuvo,Inc.stock has a beta of .86 and an expected return of 10.5%.The risk-free rate of return is 3.2% and the market rate of return is 11.2%.Which one of the following statements is true given this information?
A) Nuvo stock is underpriced.
B) The return on Nuvo stock will graph below the Security Market Line.
C) The expected return on Nuvo stock based on the Capital Asset Pricing Model is 9.88%.
D) Nuvo stock has more systematic risk than the overall market.
E) Nuvo stock is correctly priced.
Correct Answer:
Verified
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