[SOLVED] Fill in the gaps and answer the questions
I dont know how to handle this Mathematics question and need guidance.
1) a) Fill in the 8 missing values in the table.
Security |
Expected Return |
Standard Deviation |
Beta |
|
Firm A |
.105 |
.31 |
=_______ |
.85 |
Firm B |
.148 |
=_______ |
.50 |
1.40 |
Firm C |
.160 |
.65 |
.35 |
=_______ |
Market Portfolio |
.120 |
.20 |
=_______ |
=_______ |
Riskfree asset |
.050 |
=_______ |
=_______ |
=_______ |
* with the market portfolio
b) According to the CAPM, Is the stock of Firm A correctly priced (check the correct box)?
Yes ? No (the stock is overpriced) ? No (the stock is underpriced) ?
c) According to the CAPM, Is the stock of Firm B correctly priced (check the correct box)?
Yes ? No (the stock is overpriced) ? No (the stock is underpriced) ?
d) According to the CAPM, Is the stock of Firm C correctly priced (check the correct box)?
Yes ? No (the stock is overpriced) ? No (the stock is underpriced) ?