QUESTION 2 R R Stillman k=0.05[3×(0.100.0列 =0.050.065 0.116rl 1 5%<12%. UNDERVALUED) Un ion k=0.05D0.8(0.100.0别 =0.050.04 0.0% r9%(<9.5%: UNDERVALUED) Natio n alau to k:=0.051.(0.100.0 0.05-0.05 0. 105r105%=10.5%CORRECTLY PRICED Park er k;=0,.05[1.7×(0.100.0引 =0.050.085 =0.13613.5%13.0%OVERⅤ ALUED) A share is OVERVALUED or OVERPRICED when its required rate of return k;is greater than its expected rate of return based on market price ks. Conversely, a share is UNDERVALUED or UNDERPRICED when its required return is less than the expected return based on market priceJuly 2003 QUESTION 2 k = R + b (k - R ) j F j  m F  ( ) ( )  ( ) ( )  ( ) ( )  ( ) = 0 .1 3 5o r 1 3 .5 %(> 1 3 .0 % OVERVALUED ) = 0 .0 5+ 0 .0 8 5 k = 0 .0 5+ 1 .7 0 .1 0- 0 .0 5 P ark er = 0 .1 0 5o r 1 0 .5 %= 1 0 .5 % CORRECTLY P RICED = 0 .0 5+ 0 .0 5 5 k = 0 .0 5+ 1 .1 0 .1 0- 0 .0 5 Natio n alAu to = 0 .0 9o r 9 % < 9 .5 % UNDERVALUE D = 0 .0 5+ 0 .0 4 k = 0 .0 5+ 0 .8 0 .1 0- 0 .0 5 Un io n = 0 .1 1 5o r 1 1 .5 %< 12% UNDERVALUE D = 0 .0 5+ 0 .0 6 5 k = 0 .0 5+ 1 .3 0 .1 0- 0 .0 5 S tillman j j j j         A share is OVERVALUED or OVERPRICED when its required rate of return kj is greater than its expected rate of return based on market price ks. Conversely, a share is UNDERVALUED or UNDERPRICED when its required return is less than the expected return based on market price