# Capital-asset-pricing model (CAPM)

You have been provided the following data on the securities of three firms, the market portfolio, and the risk-free asset:

Security Expected Return Standard Deviation Correlation Beta

Firm A 0.13 0.12 ? 0.9

Firm B 0.16 ? 0.4 1.1

Firm C 0.25 0.24 0.75 ?

The market portfolio (S&P500) 0.15 0.1 ? ?

The risk-free asset (U.S. T-Bill) 0.05 ? ? ?

a. Fill in the missing values in the table.

b. Is the stock of Firm A correctly priced according to the capital-asset-pricing model (CAPM)? What about the stock of Firm B? Firm C? If these securities are not correctly priced, what is your investment recommendation for someone with a well-diversified portfolio?

https://brainmass.com/statistics/standard-deviation/capital-asset-pricing-model-capm-128115

#### Solution Summary

Fills up missing values (standard deviation, correlation, beta) in a table. Uses capital-asset-pricing model (CAPM) to determine whether securities are correctly priced.