Debating the investment quality of stocks of two companies

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Your friends malcom and tony are debating the investment quality of the stocks of two companies. Morrison Holdings has an expected return of 11% and a beta of 0.9 while hockey pty has an expected return of 12.5% and a beta of 1.1. the market risk premium is 6% and the expected return of the market portfolio is 12%. Based on this informatib, what would you tell your friends?

a. Both stocks are underpriced

b. Morris holdings is underpriced and hockey pty is overpriced

c. Morris holdings is overpriced and Hocket Pty is underpriced

d. Both stocks are overpriced

The answer is D but can you please explain

Reference no: EM131579248

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