CAPM Question Problem 1 (15pts). Given the following data: Security Beta Expected Return 1.3...
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CAPM Question
Problem 1 (15pts). Given the following data: Security Beta Expected Return 1.3 20% 0.8 14% 18% 1.2 (a) (10pts). Assume Securities 1 and 2 are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk-free rate? (b) (5pts). Would you recommend buying Security 3 according to CAPM? Why or why not
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