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2. Suppose you observe the following situation: Security Beta A 1.4 B 1.5 Expected Return 22.00% 23.00% If the risk-free rate is 7 percent, are

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2. Suppose you observe the following situation: Security Beta A 1.4 B 1.5 Expected Return 22.00% 23.00% If the risk-free rate is 7 percent, are these securities correctly priced? What would the risk-free rate have to be if they are correctly priced? (7)

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