Solved: A manager believes his firm will earn a 79 return next year, Basic Statistics

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A manager believes his firm will earn a 79 return next year

Undervalued /overvalued stock

A manager believes his firm will earn a 7.9% return next year. His firm has a beta of 1.69, they expect a return on the market is 15.9%, and the risk-free rate is 5.9%. Compute the return the firm should earn given its level of risk and determine whether the manager is saying the firm is under value or overvalued.

I got 22.8% and I chose overvalued and is that correct and why?

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Basic Statistics: A manager believes his firm will earn a 79 return next year

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Basic Statistics: A manager believes his firm will earn a 79 return next year

Reference No:- TGS02901336

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