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Your boss has given you the following information about two stocks. Stock ticker Beta Expected return UU 1.82 19.75% QQ 0.75 8.45% He also told

Your boss has given you the following information about two stocks.

Stock ticker

Beta

Expected return

UU

1.82

19.75%

QQ

0.75

8.45%

He also told you that CAPM holds and that these stocks are fairly priced, that is, priced according to CAPM. Answer the following questions.

(Round your final answers to 2 decimal places)

[Total marks: 5 + 5 = 10 marks]

  1. Calculate the risk-free rate. [5 marks]
  2. Calculate the expected return on the market. [5 marks]

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