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The expected return of the market is E ( rM ) = 1 4 % , while the risk - free rate is rf =
The expected return of the market is ErM while the riskfree rate is rf Stock beta Er A B C D E F Which assets are correctly priced according to the CAPM? Which ones are underpriced? Which ones are overpriced? Using all underpriced securities what is the alpha of an equallyweighted portfolio? Is it underpriced? Using all overpriced securities what is the alpha of an equallyweighted portfolio? Is it overpriced?
The expected return of the market is ErM while the riskfree rate is rf
Stock beta Er
A
B
C
D
E
F
Which assets are correctly priced according to the CAPM? Which ones are underpriced?
Which ones are overpriced?
Using all underpriced securities what is the alpha of an equallyweighted portfolio? Is it
underpriced?
Using all overpriced securities what is the alpha of an equallyweighted portfolio? Is it
overpriced?
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