If the T-bill rate is 4%, and the return required by investors for a security with a beta of 1 is 12%. Answer the following questions according to CAPM: (Leave no cells blank - be certain to enter "0" wherever required.)

a. The market portfolio's expected return will be

b. The required return on a zero-beta portfolio will be

If you want to purchase a share of stock with a price of $40. And you are going to sell the stock for $41 after receiving a dividend of $3. The beta risk of the stock is 0.5.

c-1. What is the required rate of return for this stock according to CAPM?

c-2. What is the expected rate of return of this stock?

c-3. Is the stock over-valued or under-valued?

• Underpriced

• Overpriced