Answer to Question #246396 in Economics for muskan

Question

You are a financial advisor at XYZ Stock Broking firm. Calculate the return as per CAPM for following company’s stock, identify whether the stocks are undervalued, overvalued or correctly priced and advise accordingly. Returns of T- Bill is 7%.

Stock Expected Return Beta

Tata 21% 1.7

Adani Power 16% 1.4

Ranbaxy 23% 1.1

PNB 19% 1.2

Sensex 18%

Answer 1

Priority will be Ranbaxi 23% 1.1, then Tata 21% 1.7, then PNB 19% 1.2 and the least priority will be Adani Power 16% 1.4