Suppose the rate of return on short-term government securities (perceived to be risk-free) is about 5%. Suppose also that the expected rate of return required by the market for a portfolio with a beta of 1 is 12%. According to the capital asset pricing model:

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

Expected Rate of return =%

b. What would be the expected rate of return on a stock with = 0?

Expected Rate of return =%