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Suppose you observe the following situation: Security Beta Expected Return Pete Corp. 1.30 .140 Repete Co. .99 .113 Assume these securities are correctly priced. Based

Suppose you observe the following situation:

Security

Beta

Expected Return

Pete Corp.

1.30

.140

Repete Co.

.99

.113

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

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