Determining the context of capital asset pricing model


The expected return on the market portfolio is 12%. The risk free rate is 7%. The expected return on SDA Corp. common stock is 13%. The beta of SDA Corp. common stock is 1.69. Within the context of the capital asset pricing model,_____.

a) SDA Corp stock's alpha is -2.45%

b) SDA Corp stock is fairly priced

c) SDA Corp stock alpha is 2.45%

d) SDA Corp stock is underpriced

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Business Management: Determining the context of capital asset pricing model
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