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Suppose Pepsi Co. has a beta of 0.7, whereas the beta of Microsoft is 1.1. The risk free interest rate is 3% and the market

Suppose Pepsi Co. has a beta of 0.7, whereas the beta of Microsoft is 1.1. The risk free interest rate is 3% and the market risk premium is 6%.

a. What is the expected return of Pepsi Co. according to CAPM?

b. What is the expected return of Microsoft according to the CAPM?

c. What is the expected return of an equally weighted portfolio of Pepsi Co. and Microsoft, according to the CAPM?

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