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%
- 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.
