$($a$)(5$ points$)$ State the CAPM formula, explain every notation you used.

$($b$)(5$ points$)$ Explain the implication for investment according to the CAPM if the

average return on a security is less than its expected return according to the CAPM.

$($c$)(5$ points$)$ Explain why an arbitrage can be said to exist in part $($b$)$ above.