The Risk-Free Rate Is 4 Percent

Multiple Choice

The risk-free rate is 4 percent.The expected market rate of return is 12 percent.If you expect stock X with a beta of 1.0 to offer a rate of return of 10 percent,you should

A) buy stock X because it is overpriced.
B) sell short stock X because it is overpriced.
C) sell stock short X because it is underpriced.
D) buy stock X because it is underpriced.
E) none of the above,as the stock is fairly priced.