A friend has some reliable information that the stock of SunRay Pty Ltd is going to rise from $2.50 to $3.30 per share over the next year. You know that the annual return on the S\&P 500 has been 21% and the 90 -day T-bill rate has been yielding 3.75% per year over the past 10 years. If the beta for SunRay is 1.8 , will you purchase the stock? No, because it is overvalued Yes, because the expected return equals the estimated return Yes, because it is undervalued No, because it is undervalued Yes, because it is overvalued
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