Answer:
The stock is correctly valued.
Step-by-step explanation:
Whenever the expected return is lower than the required return; the stock is said to be undervalued, when the expected return is higher than the required return; the stock is said to be overvalued, and when the expected return is equal to the required return; the stock is said to be correctly valued .
The required rate of return = Risk free rate+Beta*Market risk premium
The required rate of return = 3 + (0.8*10) = 11%
From the above calculation, the required rate of return rate is 11%, which is equal to the stock's return provided in the question, therefore, the stock is correctly valued .
