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Capital Assessment Pricing Model

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Using the Capital Assessment Pricing Model (CAPM), determine if the following securities are properly valued (+/- .50), overvalued or undervalued. Compare the CAPM rate to the Estimated/Predicted Return. The Risk-free rate = 4.75% for all companies.

Company Market Return Beta Estimated/Predicted Return
A 12.00% 1.15 11.5 %
B <11.00%> .99 6.0 %
C 14.875% 1.07 19.75 %

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