Suppose the risk-free rate is 8%. The expected return on the market is 14%. Given this data, answer the following questions:

• If a particular stock has a beta of .6, what is its expected return based on the CAPM?
• If another stock has an expected return of 20%, what must its beta be?

If a stock has a beta of 1.3 and a current return of 17%, what can you say about the stocks current price? What direction would you expect the stock price to move?