In an essay, address the following:

Here are data on two companies. The T-bill rate is 4% and the market risk premium is 6%.

What would be the fair return for each company, according to the capital asset pricing model (CAPM)? Explain how the CAPM is used to perform this calculation and how a financial advisor would utilize this information to advise a client.

Company Forecasted Return 12% Standard Deviation of Returns 8% Beta 1.5 $1 Discount Store Everything $5 11% 10% 1.0