The following information relates to five stocks listed in five different sectors at the Nairobi Securities Exchange .The return on treasury bills is 8% and the average return in the market has been found to be 13%. Estimated Return(%) Beta Williamson tea 12 0.7 Equity Bank 8.2 1 Home Afrika 20 1.2 Bamburi Cement 1.4 Nation Media Group 10 -0.4 Jsing the capital asset pricing model (CAPM) determine the Required Rate of Return (RRR) for each stock and state whether it is undervalued or overvalued.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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The following information relates to five stocks listed in five different sectors at the Nairobi Securities
Exchange .The return on treasury bills is 8% and the average return in the market has been found to be
13%.
Estimated Return(%)
Beta
Williamson tea
12
0.7
Еquity Bank
8.2
1
Home Afrika
20
1.2
Bamburi Cement
5
1.4
Nation Media Group 10
-0.4
Using the capital asset pricing model (CAPM) determine the Required Rate of Return (RRR) for each
stock and state whether it is undervalued or overvalued.
Transcribed Image Text:The following information relates to five stocks listed in five different sectors at the Nairobi Securities Exchange .The return on treasury bills is 8% and the average return in the market has been found to be 13%. Estimated Return(%) Beta Williamson tea 12 0.7 Еquity Bank 8.2 1 Home Afrika 20 1.2 Bamburi Cement 5 1.4 Nation Media Group 10 -0.4 Using the capital asset pricing model (CAPM) determine the Required Rate of Return (RRR) for each stock and state whether it is undervalued or overvalued.
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