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You are given the following information about a security X: i. X will pay 500...

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Accounting

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You are given the following information about a security X: i. X will pay 500 with probability 0.6 or 1500 with probability 0.4 at the end of the first year. ii. X will pay 700 with probability 0.6 or 2000 with probability 0.4 at the end of the second year. ini. X will have no value after two years. iv. The beta of X is 1.25 The risk-free rate is 6% vi. The market return is expected to be 11%. V. Determine fair price of X according to the Capital Asset Pricing Model

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