CAPM: If the Risk Free Rate is 3%, The expected Market return 10% and Fairy Test Inc. has a Beta of 2 then answer the following questions:

a) What should a T-Bills return be, and why

b) What should the S&P 500 return be, and why

c) What is the Market Risk Premium

d) What is Fairy Test Inc.s Risk Premium

e) What is Fairy Test Incs required rate of return

f) If Fairy Test Incs actual return was 15% last year and we believe the market adjust stock price so as to achieve the CAPM return what should happen to Fairy Test Incs stock - select the answer below:

O The stock price will increase

O The stock price will decrease

O The stock price will remain the same