The expected return of the market is E(rM) = 14%, while the risk-free rate is rf = 6%.

Stock	B(beta)	E(r)
A	1	15%
B	0.7	12%
C	0.5	10%
D	1.2	15%
E	1.4	17%
F	1.5	18%

1. Which assets are correctly priced according to the CAPM? Which ones are under-priced? Which ones are over-priced?

2. Using all under-priced securities, what is the alpha of an equally-weighted portfolio? Is it under-priced?

3. Using all over-priced securities, what is the alpha of an equally-weighted portfolio? Is it over-priced?