Exercise 1 You are given the following information about possible investments: Asset Value Stocks Growth Stocks Gold T-bills Menn ReturnStd. Dev. Correlation with Market 188 0. 20% -0.8 0% 1. If the market standard deviation is 20%, what are the CAPM betas of each of these assets? 2. Assume all assets are priced correctly according to the CAPM. What are the expected returns of the market, growth stocks and gold? 3. In addition to the assets described above you are told that the expected return on ABC, Inc. equity shares is -14% and its beta is-2. Does the market correctly price this firm? If your answer is yes, explain whether it is over or undervalued and how you would take advantage of this mispricing