2.99
See Answer

In the previous problem, what would the risk-free rate have to be for the two stocks to be correctly priced?

Problem 18:

Stock Y has a beta of 1.2 and an expected return of 11.5 percent. Stock Z has a beta of .80 and an expected return of 8.5 percent. If the risk-free rate is 3.2 percent and the market risk premium is 6.8 percent, are these stocks correctly priced?