Within the context of the CAPM, assume that the expected return on market portfolio is 16 per cent and risk-free rate is 4 per cent. Consider the following situations and tell whether the security is fairly priced. If not, what is the alpha value?
(a) Beta of stock X is 1.25 and expected return is 18.5 per cent.
(b) Beta of stock Y is 1.50 and expected return is 22 per cent.
(c) Beta of stock Z is 2.0 and expected return is 30 per cent.