Which one of the following stocks is correctly priced if the risk-free rate of return is 3.6 percent and the market risk premium is 8.1 percent? Stock Beta Expected Return
A. 89 7.83%
B. 1.52 12.59
C. 1.25 11.27
C 1.27 14.50
D. 80 10.08

Stock of D is correctly priced at 10.08%

( for the beta of Stock A and D, I guessed you meant  0.89 and 0.80 respectively as opposed to 89 and 80 you put, so i corrected and solved accordingly.)

Explanation:

Expected return = Rf + beta ( Rm - Rf )

Rf =Risk free return = 3.6

Rm-Rf = Market risk premium = 8.1%

A) Stock Beta , Expected Return=   0.89,  7.83%

Expected return = 3.6 + 0. 89 (8.1) = 10.809%-- its over priced

B) Stock Beta , Expected Return=   1.52 12.59%

Expected return = 3.6 +  1.52(8.1) = 15.912% its over priced

B) Stock Beta , Expected Return=   1.25 11.27%

Expected return = 3.6 +  1.25(8.1) = 13.725 %--- its overpriced

c) Stock Beta , Expected Return=   1.27 14.50%

Expected return = 3.6 +  1.27(8.1) = 13.887% Its underpriced

d) Stock Beta , Expected Return=    0.80 10.08%

Expected return = 3.6 + 0. 80(8.1) =  10.08% Correctly priced

the correct answer is economics is a game without winners or losers.

unlike sports or games economic is a game without losers or winner rather it is a game where everyone wins. parties of business doing businesses exchange money with each other and hence exchange is done on the basis of goods. one party takes the goods and other sales it so there is winner on both sides. each party values more highly the good it gets than the good it gives up. both sides exchange only because both intend to increase their value. so there is no concept of lose or win.