Question: suppose E(rm)= 10% risk free= 5% security a: beta -0.2, offers an expected return=2.5% security b: beta 1.5, offers an expected return=15% What security

suppose E(rm)= 10% risk free= 5%

security a: beta -0.2, offers an expected return=2.5%

security b: beta 1.5, offers an expected return=15%

 

What security is underpriced and which is over priced?

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