What is the beta of Stock X?

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You have observed the following returns over time:

Year Stock X Stock Y Market
2006 13% 14% 14%
2007 18 5 9
2008 -13 -7 -12
2009 4 3 2
2010 21 12 17

Assume that the risk-free rate is 3% and the market risk premium is 14%

 

  1. What is the beta of Stock X? Round your answer to two decimal places.

    I. Stock Y is undervalued, because its expected return is below its required rate of return.
    II. Stock X is overvalued, because its expected return exceeds its required rate of return.
    III. Stock X is undervalued, because its expected return its exceeds required rate of return.
    IV. Stock Y is undervalued, because its expected return exceeds its required rate of return.
    V. Stock X is undervalued, because its expected return is below its required rate of return.

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