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Question 2 As an equity analyst, you have developed the following return forecasts and risk estimates for the different stock mutual funds (Fund T and

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Question 2 As an equity analyst, you have developed the following return forecasts and risk estimates for the different stock mutual funds (Fund T and Fund U). The risk-free rate is 3.9% and the expected market risk premium is 6.1%. Forecasted Return CAPM Beta 9.0% 1.20 Fund T Fund U 10.0% 0.80 b. Which fund is correctly priced, and give your advice to the investors on the above investment. [6 marks]

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