Answer the following 3 questions using the information below.

Youd like to invest in Apple Inc. (AAPL). You look at Yahoo Finance and youll see the beta of Apple is 1.5. If risk free rate is 3% and the expected return on S&P500 is 9%, how much return should you require to invest in Apple Inc. according to CAPM?

12%

16.5%

9%

13.5%

If your own analysis shows that the expected return of Apple is 13%, is Apple currently undervalued, overvalued or fairly valued?

Undervalued

Not enough info to decide

Fairly valued

Overvalued

Assume that the beta of Target (TGT) is 0.5. Mark the following statements as true or false:

Market (systematic) risk of Apple is greater than market risk of Target.

Total risk of Apple is greater than total risk of Target.

True/False

False/True

False/False

True/True