Question: There are two stocks A and B, whose market prices are given by 50 and p 75. Suppose returns are described by the folowng single

There are two stocks A and B, whose market prices are given by 50 and p 75. Suppose returns are described by the folowng single factor model without idiosyncratic risk and consider the following parameters: fim-10% per annum; r/ = 3% pa : .-2; and B = 1.5 1. Are the risk premia of asset A and B higher or lower than the market premium? why? il 2. What prices for the two stocks do you expect one year from today given the CAPM holds? and assume the CAPM holds they are higher(lower) under which conditions they would be lower(higher)

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