What is the beta value of a market portfolio

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(a) What is the beta value of a market portfolio?

(b) What is the expected rate of return on a security with beta = 0?

(c) Given that risk-free rate = 3% and market return = 8%, for a stock with a beta of 1.4, what is the expected return of this stock under CAPM?

(d) Given that risk-free rate = 3% and market return = 8%, if a security - with a beta of 1.4 - actually delivers 7% return, under CAPM, is this security underpriced or overpriced? What should investors do to capture this opportunity? Please explain.

Reference no: EM133001132

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