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Solved Question: You have been provided the following data on the securities

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You have been provided the following data on the securities of three firms, the market portfolio, and the risk-free asset:
a. Fill in the missing values in the table. (Leave no cells blank – be certain to enter 0 wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Security Expected Return Standard Deviation Correlation* Beta
Firm A .105 .36 .80
Firm B .145 .55 1.35
Firm C .165 .60 .40
The market portfolio .12 .20
The risk-free asset .05

*With the market portfolio.

b-1. According to the CAPM, what is the expected return of Firm A’s stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

b-2. What is your investment recommendation for someone with a well-diversified portfolio?

Sell

Buy

b-3. According to the CAPM, what is the expected return of Firm B’s stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

b-4. What is your investment recommendation for someone with a well-diversified portfolio?

Sell

Buy
b-5. According to the CAPM, what is the expected return of Firm C’s stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

b-6. What is your investment recommendation for someone with a well-diversified portfolio?

Sell

Buy

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