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1) a) Fill in the 8 missing values in the table.
| Security | Expected Return | Standard Deviation | Correlation* | Beta |
| Firm A | .105 | .31 | =_______ | .85 |
| Firm B | .148 | =_______ | .50 | 1.40 |
| Firm C | .160 | .65 | .35 | =_______ |
| Market Portfolio | .120 | .20 | =_______ | =_______ |
| Riskfree asset | .050 | =_______ | =_______ | =_______ |
* with the market portfolio
b) According to the CAPM, Is the stock of Firm A correctly priced (check the correct box)?
Yes No (the stock is overpriced) No (the stock is underpriced)
c) According to the CAPM, Is the stock of Firm B correctly priced (check the correct box)?
Yes No (the stock is overpriced) No (the stock is underpriced)
d) According to the CAPM, Is the stock of Firm C correctly priced (check the correct box)?
Yes No (the stock is overpriced) No (the stock is underpriced)
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