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Question 2 b. The market price of a security is $40, the securitys expected rate of return is 13%, the riskless rate of interest is

Question 2

b. The market price of a security is $40, the securitys expected rate of return is 13%, the riskless rate of interest is 7%, and the market risk premium is 8%. What will be the securitys price if the covariance of its rate of return with the market portfolio doubles? If the market price of the security is $35 should you buy the security. Why and why not? (20 marks)

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