"Given the following data:

Expected return of stock Y 14%

Expected return of market index 11%

Risk-free rate 3%

Standard deviation of stock Y returns 15%

Standard deviation of market index returns 12%

Correlation of stock Y and market index returns 0.7

Based on the capital asset pricing model (CAPM), stock Y is *most likely* : **undervalued**"

Answer is undervalued, but I wanted to understand intuition.

I can arrive at the CAPM return which gives 10%, but I get a bit lost on the intuition of why 14% vs 10% means Y stock is undervalued.

Can someone help me clarify?

Thanks.