Neither stock pays dividends

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Given the following information, determine whether Stock A and B are correctly valued based on the CAPM.

Market risk premium = 5%; risk-free rate = 2%

Stock A current price = $20. You expect the stock price to be $22 in one year. Stock A beta = 1.2

Stock B current price = $50. You expect the stock price to be $52 in one year. Stock B beta = 0.9

Neither stock pays dividends

Please show steps.

Reference no: EM131924046

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