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Suppose firms X,Y and Z have the expected returns and betas shown below: The risk-free rate is currently 5.70% and the market risk premium is
Suppose firms X,Y and Z have the expected returns and betas shown below: The risk-free rate is currently 5.70% and the market risk premium is 10.30%. A) According to CAPM, what rate of return each year should investors require as compensation for investing in Firm X? % (Round your answer to two decimal places) B) According to the SML, is Firm X currently undervalued, correctly priced, or overvalued? (No answer given) overvalued correctly valued undervalued \% H) What would the risk-free rate have to be in order for Firm X and Firm Z to be correctly priced relative to each other? You may ignore Firm Y. Round your answer to two decimal places)
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