Question 13.S-TP.3: Risk and Return Suppose you observe the following situation:...

Fundamentals of Corporate Finance

Risk and Return Suppose you observe the following situation:

Security	Beta	Expected Return
Cooley, Inc.	1.8	22.00%
Moyer Co.	1.6	20.44

If the risk-free rate is 7 percent, are these securities correctly priced? What would the risk-free rate have to be if they are correctly priced?

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