Question: Suppose you observe the following situation: Security Beta Expected Return Peat Company 1.20 10.60 Re-Peat Company 0.80 9.30 Assume these securities are correctly priced. Based

Suppose you observe the following situation:

Security Beta Expected Return

Peat Company 1.20 10.60

Re-Peat Company 0.80 9.30

Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk-free rate?

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