Question: Problem 12-10 CAPM and Expected Return (LO2) The risk-free rate is 6% and the expected rate of return on the market portfolio is 10%. a.

Problem 12-10 CAPM and Expected Return (LO2) The risk-free rate is

Problem 12-10 CAPM and Expected Return (LO2) The risk-free rate is 6% and the expected rate of return on the market portfolio is 10%. a. Calculate the required rate of return on a security with a beta of 1.24. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Required return b. If the security is expected to return 16%, is it overpriced or underpriced? Underpriced Overpriced

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