An analyst wants to determine whether Dover Holdings is overvalued or undervalued, and by how much (expressed as percentage return). The analyst gathers the following information on the stock:
· Market standard deviation = 0.70
· Covariance of Dover with the market = 0.85
· Dover's current stock price (P0) = $35.00
· The expected price in one year (P1) is $39.00
· Expected annual dividend = $50
· 3-month Treasury bill yield = 4.50%
· Historical average S&P 500 return = 12.0%
Dover Holdings stock is:

A.Undervalued by approximately 1.8%.

B.Overvalued by approximately 2.1%.

C.Overvalued by approximately 1.8%.