Question: Suppose you observe the following situation: Security Beta Expected Return Pete Corporation 1.25 .1080 Repete Company .87 .0820 a. Assume these securities are correctly priced.

Suppose you observe the following situation: Security Beta Expected Return Pete Corporation 1.25 .1080 Repete Company .87 .0820 a. Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

b. What is the risk-free rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

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