According to the Capital Asset Pricing Model (i.e., CAPM), if Rf = risk free interest rate, Rm = Expected return on the market portfolio, b = beta, and E(Ra) = expected return on stock a:

1. E(Ra) = Rf + (Rm - Rf)

2.

E(Ra) = Rf - b(Rm - Rf)

3.

E(Ra) = bRf + (Rm - Rf)

4.

E(Ra) = Rf + b(Rm - Rf)

5. None of the above is a correct specification of the CAPM.

All else constant, if the yield to maturity increases, the price of fixed coupon bond will:

a.	increase
b.	decrease
c.	remain unchanged
d.	either increase or decrease depending on the par value of the bond
e.	either increase or decrease depending on the coupon rate of the bond