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> Exercise B3. Analysing Securities Information. The risk-free rate of return (r) is 2% and the expected market rate of return (rm) is 10%. The

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> Exercise B3. Analysing Securities Information. The risk-free rate of return (r) is 2% and the expected market rate of return (rm) is 10%. The shares A, B and C all pay a dividend (D) of $6 a year. The betas for the shares are: B = 0.2; B = 1.0; and B. = 1.8. The shares are all trading at the same price (P) of $60. Requirements. Answer the following questions: Q1. What are the expected returns on A, B and C? Q2. What are the expected prices of A, B and C? Q3. What action would you recommend for A? Q4. What action would you recommend for B? Q5. What action would you recommend for C? (1 mark each; total 5 marks)

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