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Given the data in the figure, answer all questions below.

1. The risk-free rate is 1.2% and the market risk premium is 5.41%. And BOA has a beta of 1.3. What is the expected return for this stock?

2. Compare the CAPM return and the HPR, is the stock overvalued, undervalued or correctly priced? Should you buy it or short the stock?

3. Suppose that you buy the stock, and one year later, you get the dividend as expected, and the price of this stock at that time goes up to $50. What is the unexpected return? (Hint: you need to calculate the HPR with these actual data first, then calculate the unexpected return.)

Bank of America Corporation (BAC) Add to watchlist NYSEUSE Delayed Price. Cumercy USD 46.97 -0.36 (-0.76%) 47.03 +0.06 (+ A dose: November 4:00PM EOT After Hours Nov 5 06:59PM Summary Company Outlook Chart Conversations Stati Previous Close Open Bd Ask 3.34 Day's Range S2 Week Range 47.33 Market Cap 384.4068 47.60 Beta (SY 1.54 Monthly 0.00 x 2200 PERMITTM) 14.06 0.00 x 1800 EPS (TTM 46.82-47.82 Earings Date Jan 19, 2022 26.30 - 48.69 Forward Dividend & Yield 0.84(1.79% 38,271,181 Ex Dividend Date Dec 02.2021 45.527,243 ly Target 47.18 Related Research Undervalued Ahort Barkod Aria Coronation of America is one of 3. We a View more Volume Ang Volume Fair Value XX.XX 18. Este View details Bank of America Corporation (BAC) Add to watchlist NYSEUSE Delayed Price. Cumercy USD 46.97 -0.36 (-0.76%) 47.03 +0.06 (+ A dose: November 4:00PM EOT After Hours Nov 5 06:59PM Summary Company Outlook Chart Conversations Stati Previous Close Open Bd Ask 3.34 Day's Range S2 Week Range 47.33 Market Cap 384.4068 47.60 Beta (SY 1.54 Monthly 0.00 x 2200 PERMITTM) 14.06 0.00 x 1800 EPS (TTM 46.82-47.82 Earings Date Jan 19, 2022 26.30 - 48.69 Forward Dividend & Yield 0.84(1.79% 38,271,181 Ex Dividend Date Dec 02.2021 45.527,243 ly Target 47.18 Related Research Undervalued Ahort Barkod Aria Coronation of America is one of 3. We a View more Volume Ang Volume Fair Value XX.XX 18. Este View details

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