Your opinion is that CSCO has an expected rate of return of 0.1375. It has a beta of 1.3. The risk-free rate is 0.04 and the market expected rate of return is 0.115. According to the Capital Asset Pricing Model, this security
Is
A) underpriced.
B) overpriced.
C) fairly priced.
D) Cannot be determined from data provided.

Question

Quizplus · Accepted Answer

13.75% - [4% + 1.3(11.5% - 4%)] = 0.0%; therefore, the security is fairly priced.

Your Opinion Is That CSCO Has an Expected Rate of Return