Question: a) The expected return on a security, according to the CAPM, is 12.02%, the beta of the security is 1.51 and the risk-free rate is

a) The expected return on a security, according to the CAPM, is 12.02%, the beta of the security is 1.51 and the risk-free rate is 1.34%. What is the value of the market risk premium?

b) A stock has a beta of 1.2, the expected return on the market is 8.5% and the risk-free rate is 2.9%. Based on it's current price, the stock has an expected return of 14.6%. Based on the predictions of the CAPM, how would you describe this stock?

- Underpriced

- Overpriced

- Correctly Priced

c) The expected return on a security, according to the CAPM, is 14.72%, the beta of the security is 1.24 and the risk-free rate is 2.1%. What is the value of the risk premium?

d) The expected return on a security, according to the CAPM, is 14.64%, the beta of the security is 1.57 and the risk-free rate is 2.19%. What is the expected return on the market?

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