The risk-free rate and the expected return on the market portfolio?

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Assume that the CAPM is correct. The beta of Asset Y is 1.40 and its expected return is 11.86%. The beta of Asset Z is 0.80 and its expected return is 8.32%. The risk-free rate and the expected return on the market portfolio are:


a) The risk-free rate is 3.6% and the expected return on the market portfolio is

5.9%.

b) The risk-free rate is 3.6% and the expected return on the market portfolio is

9.5%.

c) The risk-free rate is 2.5% and the expected return on the market portfolio is

5.9%.

d) Can’t say: not enough information has been provided.

The risk-free rate and the expected return on the market portfolio?