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Suppose you observe the following situation: Security Beta Expected Return Pete Corp. 1.65 .175 Repete Co. 1.34 .148 Assume these securities are correctly priced. Based

Suppose you observe the following situation:

Security Beta Expected Return
Pete Corp. 1.65 .175
Repete Co. 1.34 .148

Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Expected return on market 11.84 %

What is the risk-free rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Risk-free rate 3.13 %

This is what I did. Please tell me if I did it correct. Thanks. (.175-RF)/1.5=(.148-RF)/1.34 RF=0.03129=3.13 .175=0.0313+1.65(R1-.0313) =11.84

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