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Here are data on two companies. The T-bill rate is 5% and the market risk premium is 9.5% Company $1 Discount Store Everything $5 Forecast

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Here are data on two companies. The T-bill rate is 5% and the market risk premium is 9.5% Company $1 Discount Store Everything $5 Forecast return 16% 15% Std Dev of returns 24% 26% Beta 1.4 1.0 What would be the fair return for each company, according to CAPM? Characterize each company as underpriced, overpriced or properly priced

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