The following contains forecasts for shares of Mellatte Corporation and the market portfolio.

The risk-free interest rate is 5%.

The Expected Return for Mellatte Corporation is 0.08.

The Expected Return for Market Portfolio is 0.16

The Standard Deviation for Mallette Corporation is 0.09

The Standard Deviation for Market Portfolio is 0.14

Covariance (PACM, Market) = +0.03 Risk-free interest rate = 5%

Based on the CAPM, are Mellatte shares fairly priced?

Explain carefully and completely. Show the calculations or utilize a spreadsheet to support the answer.

Answer rating: 100% (QA)

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