Suppose you observe the following situation: Security Pete Corporation Repete Company Beta 1.25 .87 Expected Return 1080 .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.) a. Expected return on market using Pete Corporation a. Expected return on market using Repete Company b. Risk-free rate % % %

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Suppose you observe the following situation:
Security
Pete Corporation
Repete Company
Beta
1.25
.87
Expected Return
1080
.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.)
a. Expected return on market using Pete Corporation
a. Expected return on market using Repete Company
b. Risk-free rate
de de
%
%
%
Transcribed Image Text:Suppose you observe the following situation: Security Pete Corporation Repete Company Beta 1.25 .87 Expected Return 1080 .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.) a. Expected return on market using Pete Corporation a. Expected return on market using Repete Company b. Risk-free rate de de % % %
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