A Stock Has a Beta of 1

Multiple Choice

A stock has a beta of 1.25. The risk-free rate is 5 percent and the return on the market is 6 percent. The estimated return for the stock is 14 percent. According to the CAPM, you should

A) sell because it is overvalued.
B) sell because it is undervalued.
C) buy because it overvalued.
D) buy because it is undervalued.
E) short because it is undervalued.