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NEW QUESTION: 3
An analyst predicts that the return on Royal Company stock will be 15%. The analyst is provided with the following data for Royal and the broad market:
Royal Company beta 1.5
Risk-free rate 5%
Expected market return 11 %
From the data, determine if Royal Company stock is undervalued, overvalued, or correctly valued.
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B. Undervalued.
C. Overvalued.
Answer: B