[Solved] The risk-free rate for the next year is 3%, and the market risk premium is expected to be 10%. The beta of Acme’s stock is 1.5. If you believe that Acme’s stock will actually return 18.2% over the next year, then according to the CAPM you should:

Q.	The risk-free rate for the next year is 3%, and the market risk premium is expected to be 10%. The beta of Acme’s stock is 1.5. If you believe that Acme’s stock will actually return 18.2% over the next year, then according to the CAPM you should:
A.	be indifferent between buying and selling the stock.
B.	buy the stock because it is under priced.
C.	sell the stock because it is overpric
Answer» B. buy the stock because it is under priced.

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