Question: Suppose you observe the following situation: Security ______Beta _________Expected Return Pete Corp............... 1.21 .................. 1079 Pete Corp................ 83 .................... 0843 Assume these securities are correctly

Suppose you observe the following situation:

Security ______Beta _________Expected Return

Pete Corp............... 1.21 .................. 1079

Pete Corp................ 83 .................... 0843

Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk-free rate?


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