1.If the market expected return is 13% and the risk-free rate is 1%, which of the following stock(s) is/are overpriced according to the CAPM?

2. If a portfolio consists of 30% of each stock and 10% of risk-free asset, what should the portfolios expected return be if the CAPM holds?

Current price Expected 1-yr forward price Beta $20 $27.5 3 Stock A Stock B $30 $33 0.6 Stock C $40 $48 2