Your neighbor is a security analyst he has conducted

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Reference no: EM13610808

Your neighbor is a security analyst. He has conducted hisresearch about some stocks in Karachi (name ofcity) Stock Exchange (KSE) and his findings are as follows:

Stock A will have a return of 18%, stock B will have a return of20 % and stock C will have a return of 22%, but his findings do notinvolve the CAPM.

You are a business graduate and when you have used CAPM, you havecome to know that:Stock A's expected return is 15.50%, Stock B'sexpected return is 24.63% and Stock C's expected return is25.39%.

In your opinion, whether the KSE has over-priced or under-pricedeach stock and in the light of these results, which of these stocksare suitable for investment?

Reference no: EM13610808

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