Question: could you please answer these with workings 2) CAPM and Expected Return. Suppose the yield on short-term government securities (perceived to be risk-'ee] is about

could you please answer these with workings

2) CAPM and Expected Return. Suppose the yield on short-term government securities (perceived to be risk-'ee] is about 3%. Suppose also that the expected return required by the market for a portfolio with a beta of l is 10%. According to the Capital Asset Pricing Model: a. What is the expected return on the market portfolio? [3 Marks] b. What would be the expected return on a zero-beta stock? [4 Marks] c. Suppose you consider buying a share of stock at a price of $30. The stock is expected to pay a dividend of $2 next year and to sell then for $31. The stock risk has been evaluated at [3 = -0.2. Is the stock overpriced or underpriced'? Provide full details of your calculations and explain your answer. [6 Marks]

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