Suppose you observe the following situation:SecurityPete Corp.Expected Return.190Beta1.80Repete Co.1.49.163a. Assume these securities are correctly priced. Based on the CAPM, what is theexpected return on the market? (Do not round intermediate calculations and enteryour answer as a percent rounded to 2 decimal places, e.g., 32.16.)b. What is the risk-free rate? (Do not round intermediate calculations and enter youranswer as a percent rounded to 2 decimal places, e.g., 32.16.)a. Expected return on marketb.Risk-free rate A stock has an expected return of 12.2 percent, the risk-free rate is 6 percent, and themarket risk premium is 10 percent. What must the beta of this stock be? (Do not roundintermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)Beta of stock

Capital asset pricing model depicts the relationship between the expected return and systematic risk…

Answered: Suppose you observe the following…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Please answer both QUESTION 7 According to the capital asset pricing model (CAPM), fairly priced securities should have A. A non-zero alpha. в.A fair return based on the level of systematic risk. C. A fair return based on the level of unsystematic risk. D.A beta of 1. QUESTION 8 Diversification can increase fair return. True False
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