Portfolio has beta =1.5; its alpha is 1%, risk free rate is 5%; market expected return is 10%.

Find the market risk premium R_mt, expected return r_portfolio and excess return R_portfolio.

Use the formula- R_portfolio= beta_portfolio *R_market} + alpha + e_portfolio;

Where each security R=r-r_free is excess return;

Is such portfolio over-, under-, or fairly priced? Assume, portfolio is well diversified. Which term(s) should be

negligible?