The current market prices of stocks

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The current market prices of stocks A and B are $20 and $30 respectively. Stock A is expected to pay a dividend of $2 per share and stock B does not pay dividends. Yahoo Finance estimates a one-year price target of $25 for A and $33 for B. The beta of A is 3.0 while the beta of B is 1.5. The 10-year Treasury bond yields 3%. The market risk premium is 6%. Given the above information

a) both stocks are undervalued.

b) stock A is undervalued and B is overvalued.

c) stock A is overvalued and B is undervalued.

d) both stocks are overvalued.

Reference no: EM131296835

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