For each question pick the most reasonable response based on the information provided.

B Assume that the CAPM is correct and a security's beta has been estimated as 1.2. The riskfree rate of return is 6% and the security's expected rate of return is 18%. This implies that the market risk premium is closest to: a) 6.0% b) 10.0% c) 12.0% d) 16.0% B2. Assume that the CAPM is correct and the betas of securities X and Y are 0.8 and 1.2, respectively. The expected returns for these securities are 15% and 20%. This implies that the riskfree rate is closest to: a) b) c) d) 5.0% 10.0% 12.5% 15.0%