State whether each of the following is inconsistent with an efficient capital market, the CAPM, or both:

a. A security with only diversifiable risk has an expected return that exceeds the risk-free interest rate.

b. A security with a beta of 1 had a return last year of 15% when the market had a return of 9%.

c. Small stocks with a beta of 1.5 tend to have higher returns on average than large stocks with a beta of 1.5.Appendix