Question #6: CAPM [14 Points] Use the Figure below to answer Parts (a) - (c) E(r)...

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Question #6: CAPM [14 Points] Use the Figure below to answer Parts (a) - (c) E(r) 0.105] 0.034 0 1 1.6 SML Beta (B) (a) What is the risk-free rate (r)? No explanation is required. [2 Points] (b) What is the expected return of the market portfolio? No explanation is required. [2 Points] (c) What is the expected return of an asset with a beta of 1.6? [3 Points] Page 3 of 4 Use the following scenario to answer Part (d) Suppose that the current price for a share of Cinemark Holdings, Inc. (CNK) stock is at $9.62. The stock is expected to pay $0.45 in dividends next year and you anticipate that you will be able to sell the stock for $11.05 next year. Assume that E(rM) = 0.106, the risk-free rate (r) = 0.033 and CNK has a beta (B) = 2.10. (d) Is CNK stock overpriced or underpriced at its current price. You must justify your answer. [Hint: Find the required rate of return of CNK stock and then compare it to the 1 Year HPR of CNK stock] [7 Points] Question #6: CAPM [14 Points] Use the Figure below to answer Parts (a) - (c) E(r) 0.105] 0.034 0 1 1.6 SML Beta (B) (a) What is the risk-free rate (r)? No explanation is required. [2 Points] (b) What is the expected return of the market portfolio? No explanation is required. [2 Points] (c) What is the expected return of an asset with a beta of 1.6? [3 Points] Page 3 of 4 Use the following scenario to answer Part (d) Suppose that the current price for a share of Cinemark Holdings, Inc. (CNK) stock is at $9.62. The stock is expected to pay $0.45 in dividends next year and you anticipate that you will be able to sell the stock for $11.05 next year. Assume that E(rM) = 0.106, the risk-free rate (r) = 0.033 and CNK has a beta (B) = 2.10. (d) Is CNK stock overpriced or underpriced at its current price. You must justify your answer. [Hint: Find the required rate of return of CNK stock and then compare it to the 1 Year HPR of CNK stock] [7 Points]