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 1.0 is 8.0%. According to the capital asset pricing model:

Suppose you consider buying a share of stock at a price of $30. The stock is expected to pay a dividend of $4 next year and to sell then for $31. The stock risk has been evaluated at = 0.5. c-1. Using the SML, calculate the fair rate of return for a stock with a = 0.5. (Round your answer to 1 decimal place.)

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