单选题

An analyst determines that four stocks have the following characteristics:

Stock	Beta	Estimated return
A	0.6	5%
B	1.0	10%
C	1.6	16%
D	2.0	16%

If the risk-free rate is 4 percent and the expected return on the market is 10 percent, which of the following statements is FALSE?（）

A、 Stock A is overvalued.
B、 Stock D is overvalued.
C、 Stock B is properly valuced and Stock C is undervalued.

【正确答案】 B

【答案解析】

Using the CAPM, the required rate of return for each stock is:
E(R_A)=4%+0.6×(10%-4%)=7.6%.
5.0%-7.6%=-2.6% overvalued.
E(R_B)=4%+1.0×(10%-4%)=10.0%.
10.0%-10.0%=0.0% properly valued.
E(R_C)=4%+1.6×(10%-4%)=13.6%.
16.0%-13.6%=2.4% undervalued.
E(R_D)=4%+2.0×(10%-4%)=16.0%.
16.0%-16.0%=0.0% properly valued.