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The risk free rate is 1% and the market risk premium is 10%. You are given information about 3 other assets: Asset ER SD Beta
The risk free rate is 1% and the market risk premium is 10%. You are given information about 3 other assets:
Asset | ER | SD | Beta |
A | 2 | 20 | 0 |
B | 16 | 20 | 2 |
C | -5 | 20 | -1 |
A) Classify the 3 assets as underpriced/overpriced/correctly priced according to the CAPM.
B) If you had to buy 1 of these 3 assets to hold by itself, which would you buy?
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