Analyst assessment of betas

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According to your favorite security analyst (who is very good at estimating betas, expected returns, and standard deviations):

βABC,M = 0.3, σ[RABC] = 8%, E[RABC ] = 10%, Rf = 8%, E[RM] = 16%, σ[RM] = 20%.

You accept the analyst's assessment of betas, expected returns, and standard deviations. The riskless asset is T-bills. Compared to its CAPM price, ABC is:

A. overpriced

B. underpriced

C. correctly priced

D. correctly priced if the market model holds as well

E. cannot say based on the information given

Reference no: EM132955752

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