Taylor, Inc., stock has a beta of 1.2 and an expected return of 9.3%. The risk-free rate is 4.1% and the market risk premium is 6.8%. This stock is because the CAPM return for the stock is %.a. overvalued; 11.87. b. undervalued; 12.09.
c. undervalued; 12.26.
d. overvalued; 12.26.
e. undervalued; 11.87.

The stock is overvalued because the CAPM return for the stock is 12.26%

Option d is the correct answer.

Explanation:

Using the CAPM, we can calculate the required rate of return on a stock. This is the minimum return required by the investors to invest in a stock based on its systematic risk, the market's risk premium and the risk free rate. If the expected return on a stock is less than the required rate of return, a stock is said to be overvalued and vice versa.

The formula for required rate of return under CAPM is,

r = rRF + Beta * rpM

Where,

rRF is the risk free rate

rpM is the market return

r = 0.041 + 1.2 * 0.068

r = 0.1226 or 12.26%

The stock is overvalued because the CAPM return for the stock is 12.26%

1) the stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) the time from initial research and development to the time at which sales and support of the product to customers are withdrawn. 3) the period of time during which a product can be produced and marketed profitably.

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answer(b); ; ; the quantitative or qualitative variable for which the experimenter wishes to determine how its value is affected by the explanatory variable;