Suppose the rate of return on short-term government securities (perceived to be risk-free) is about 6%. Suppose also that the expected rate of return required by the market for a portfolio with a beta of 0.5 is 5%.

What is the expected rate of return on the market portfolio?

Suppose if you buy stock A now, you have to pay $40 per share. Stock A is expected to pay $1.50 in dividends next year and you expect that you can sell stock A for $58 per share. Stock As = 0.5. Should you buy stock A according to CAPM?