Question: Explain based on the Capital Asset Pricing Model (CAPM) and the coefficient for the firms Lilrios Corp and Santo, the following and show calculations and

Explain based on the Capital Asset Pricing Model (CAPM) and the coefficient for the firms Lilrios Corp and Santo, the following and show calculations and qualitative analysis for each premise: Premise: The firm Lirios Corp has a beta coefficient of 1.85. On the other hand, the Santo firm has a Beta of .75. The risk-free rate is 3% and the expected rate of return on the market (market expected return) is 12%. According to the CAPM Model and using of the information provided, 1. What will be the Required Rate of Return for both firms? Show computations A. Required Rate of Return for Lirios Corp. B. Required Rate of Return for Santo Corp. C. Explain the results obtained, in terms of risk and return:

2. If we now assume that the market goes down (decreases its return by 20%, how Do the results of question # 1 change? Show Computations and then explain the results: A. Required Rate of Return for Lirios Corp. B. Required Rate of Return for Santo Corp. C. Explanation of the results, in terms of risk and return:

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