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025 - Assume that the risk-free rate of interest is 4% and the expected rate of return on the market is 18%. I am buying a firm with an expected perpetual cash ow of $1,000 but am unsure of its risk. If I think the beta of the firm is 0.7, when in fact the beta is really 1.4, how much more will I offer for the rm than it is truly worth? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Amount offered in excess :I 026 : Suppose the rate of return on short-term government securities (perceived to be risk-free) is about 7%. Suppose also that the expected rate of return required by the market for a portfolio with a beta of 1 is 12%. According to the capital asset pricing model: a. What is the expected rate of return on the market portfolio? (Round your answer to 2 decimal places.) Expected rate of return _ % b. What would be the expected rate of return on a stock with B = 0? (Round your answer to 2 decimal places.) Expected rate of return _ % c. Suppose you consider buying a share of stock at $43. The stock is expected to pay $2.5 dividends next year and you expect it to sell then for $44. The stock risk has been evaluated at B = -.5. Is the stock overpriced or underpriced