Question: Suppose you observe the following situation: Security beta expected return Cool, Inc. 1.8 20 % Mayer Co. 1.6 18% (1) The risk-free rate is 6%.

Suppose you observe the following situation:
Security beta expected return
Cool, Inc. 1.8 20 %
Mayer Co. 1.6 18%
(1) The risk-free rate is 6%. Are these two stocks correctly priced based on the CAPM?
What would the risk-free rate in percentage have to be if both stocks are correctly priced according the CAPM? Show two decimals, e.g., 1.23%.

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