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We know that two stocks A and B are correctly priced by the CAPM model. For A, the expected return is 12%, and the beta
We know that two stocks A and B are correctly priced by the CAPM model. For A, the expected return is 12%, and the beta is 1.5; for B, the expected return is 6%, and the beta is 0.5. Based on this information, what are the risk free rate and equity risk premium?
A. 3%; 9%
B. 3%; 6%
C. 2%; 8%
D. 4%; 10%
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