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Do think the share is overvalued or undervalued and why

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Problem 1: Brimbank company shares has an expected return of 15%. The share's Beta is 1.2, the risk-free rate is 3% and the market risk premium is 6%. Based on this information do you think the share is overvalued or undervalued? Why?

Problem 2:  A particular share sells for $30. The shares' Beta is 1.25, the risk-free rate is 4%, and the expected return on the market portfolio is 10%. If you predict that the share's market price next year will be $33 (and no dividend), should you buy the share or not? Why?

Reference no: EM132783667

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