1. What is the expected rate of return of stock X that has a beta of 1 if the expected return on the market is 15%? Why?

1. The current risk free rate is 3% and the expected return of market portfolio is 8%. In the following chart Grace draws the securities market line and identifies the relative positions of three securities: market portfolio M, Security A and Security B. Using the chart below, identify 4 errors that Grace made on the chart, and explain your answer with reasons.
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