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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 C) According to CAPM, what rate of return each year should investors require as compensation for investing in Firm Y? % (Round your answer to two decimal places) D) According to the SML, is Firm Y currently undervalued, correctly priced, or overvalued? (No answer given) undervalued overvalued correctly valued E) According to CAPM, what rate of return each year should investors require as compensation for investing in Firm Z? % (Round your answer to two decimal places)
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