# CAPM and Expected Rate of Return

If the risk-free rate is 6 percent and the expected rate of return on the market portfolio is 13 percent, is a security with a beta of 1.25 and an expected rate of return of 16 percent overpriced or underpriced?

© BrainMass Inc. brainmass.com June 3, 2020, 9:18 pm ad1c9bdddfhttps://brainmass.com/business/capital-asset-pricing-model/capm-expected-rate-return-176097

#### Solution Summary

This solution provides step by step calculations for expected rate of return.

$2.19