Suppose the yield on short$-$term government securities $($perceived to be risk$-$free$)$ is about $4\%.$ Suppose also that the expected

return required by the market for a portfolio with a beta of $1\mathrm{.}0$ is $9\mathrm{.}0\%.$ According to the capital asset pricing model:

Suppose you consider buying a share of stock at a price of $$35.$ The stock is expected to pay a dividend of $$8$ next year and

to sell then for $$37.$ The stock risk has been evaluated at $=-0\mathrm{.}5.$

c$-1.$ Using the SML$,$ calculate the fair rate of return for a stock with a $=-0\mathrm{.}5.($Round your answer to $1$ decimal place.$)$

Fair rate of return

$\%$

c$-2.$ Calculate the expected rate of return, using the expected price and dividend for next year. $($Round your answer to $2$

decimal places.$)$