3. According to the Capital Asset Pricing Model, the market compensates investors for taking: a. systematic risk b. unsystematic risk. c. firm-specific risk d. total risk 14. The risk-free rate and the expected market rate of return are 0.02 and 0.08 respectively Based on the CAPM, the expected return on a security with a beta of 1.1 is: a. 0.052 b. 0.086 c. 0.167 d. 0.190 15. Security X has an expected rate of return of 13% and a beta of 1.5. If the risk free rate is 5% and the market expected rate of return is 10%, according to the CAPM, this security is: a. underpriced b, overpriced c. fairly priced d. cannot be determined from the information provided