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  3. given that stock y has a beta of 1.05 and an expec

Given that Stock Y has a beta of 1.05 and an expected return of 13...

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Finance

Given that Stock Y has a beta of 1.05 and an expected return of 13 percent, and Stock Z has a beta of 0.70 with an expected return of 9 percent, along with a risk-free rate of 4.5 percent and a market risk premium of 7.2 percent, evaluate the valuation of Stock Y and Z.
Are they correctly priced, undervalued, or overvalued in the context of the Security Market Line (SML)?
(Note: Support your assessment by calculating and comparing the reward-to-risk ratios of the stocks with the market's ratio and by analyzing their respective positions in relation to the SML.)

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