Assume these securities are correctly priced based on the


Suppose you observe the following situation:

Security Beta Expected Return

Pete Corp. 1.15 0.129

Repete Co. 0.84 0.102

Assume these securities are correctly priced. Based on the CAPM,

(a) what is the expected return on the market? (b)What is the risk-free rate?

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Financial Management: Assume these securities are correctly priced based on the
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