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Expected Return and Risk Free Rate.

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The following is the market situation:

Security Beta Expected Return

A Co. 1.25 19%

B Co. 0.75 15%

Assume that these securities are priced according to the CAPM. What is the expected return

on the market? What is the risk free rate?

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This solution provides a detailed step by step explanation of the given finance problem involving calculating the expected return and risk-free rate.

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