A limitation of the Capital Asset Pricing Model is that it does not account for inflation, i.e. the CAPM is likely to underestimate the nominal rate of return required by investors in high inflation periods and overestimate the nominal rate of return required by investors in low inflation periods. Is it true or False? Justify your answer. Assume both portfolios A and B are well-diversified, that E(rA) = 13.2% and E(rB) = 14.3%. If the economy has only one risk factor, and BA = 1 while BB = 1.2, what must be the risk-free rate? You have developed the following information about two mutual funds: Name of fund Beta Expected return Market Fund X 1.00 14% Energy Fund Y 0.80