Case study: Analysis of risk/return and application of CAPM Total Value: 25 points Objectives of the course that aims to evaluate the following assignment: T7. Recognize how investors and financial managers quantify the notion of risk and return in their financial decisions C7b.Identify the means to evaluate and quantify risk and return on investments. C7c. Explain the concepts of correlation and diversification in a portfolio. C7d. Contrast risk levels between different investments. C7e. Explain the outcome of the beta measure for a publicly traded firm. C7f. Apply CAPM theory ("Capital Asset Pricing Model") and evaluate the effect of a change in a firm's risk level. 1. Explain based on the Capital Asset Pricing Model (CAPM) and the coefficient for ABC Corp and DEF Corp, the following and show calculations and qualitative analysis for each premise: Premise: ABC Corp has a beta coefficient of .85. On the other hand, the firm DEF Corp has a beta of 1.50. The risk-free rate is 3% and the market-expected return rate is 8%. According to the CAPM Model and making use of the information provided, What will be the Required Rate of Return for both firms? Show computations A. Required Rate of Return for ABC Corp. (2 puntos) B. Required Rate of Return for DEF Corp. (2 puntos) C. Explain the results obtained, in terms of risk and return: (2 points)