Question 10

You are an investment analyst, currently identifying potential investment with greater value. You have spotted two investments which have the following characteristics:

Asset	E( R)%	beta
X	15	1.25
Y	11	1.0
Risk-free	3	0
Market index	11	1

a) Using CAPM model find the required rate of return

b) Identify whether they are under or over-priced.

c) Calculate alpha for both asset X and Y

Please show ALL steps, and no hand writing. Thanks.