Security X has an expected rate of return of 13% and a beta of 1.15. The risk-free rate is 5% an model, security X is A) fairly priced B) overpriced C) underpriced D) None of the above answers are correct 13. d the market expected rate of return is 15%. According to the capital asset pricing If CAPM is valid, which of the situations below are possible? a. 14. Standard deviation Portfolio Riskfree Market Expected return 10% 22% 2490 16% b. Portfolio Riskfree Market Expected return 10% 18% Beta c. d. Both A and B None of the above The risk free rate is 8% and the expected return on the market is 18%. You are buying a firm with an expected perpetual cash flow of $1000 and a beta of 1.2. How much do you think the firm is worth? a. 1000 b. 3000 c. 5000 d. none of the above The expected return of a portfolio is 15% and its beta is 0.8. The T-bill rate is 5% and the S&P 500 index expected return is 15%. According to CAPM, the alpha of this portfolio is 16. and this portfolio is A) positive, overvalued B) negative, overvalued C) positive, undervalued D) negative undervalued E) 0, fairly valued Which of the following statements about the security market line (SML) is not true? a. 17. The SML is a graphic representation of the relationship between expected return and beta. b. Properly valued assets plot exactly on the SML c. The SML provides a benchmark for evaluating expected investment performance. d. The SML leads all investors to invest in the same portfolio of risky assets. 18. Which version of the efficient market hypothesis focuses on the most inclusive set of information? A) Semistrong-form B) Weak-form Strong-fornm It depends