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(4) Suppose you observe the following situation: Security Beta Expected Return Pete Corp. 1.15 12.90% Repete Co. 0.84 10.20% Assume the two securities are correctly

(4) Suppose you observe the following situation: Security Beta Expected Return Pete Corp. 1.15 12.90% Repete Co. 0.84 10.20% Assume the two securities are correctly priced. Based on CAPM, what is the expected return on the market? What is the risk-free rate? (15 points)

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