Risk free rate and market risk premium

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Reference no: EM13731339

1) Assume the risk free rate is 6% and the market risk premium is 7.5%. Ragnarok Unlimited Corp. (RUC) has a beta of 4, and it offers a return of 27% at the moment. Is RUC fairly priced according to the CAPM? Why or why not? If the price is not fair, what does the CAPM say will happen to the price of RUC stock?

2) If the CAPM assumptions are true, then it follows that all investors hold the same portfolio. Is this statement true or false? Explain why your answer makes sense.

Reference no: EM13731339

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