Suppose you observed the following situation:   Security Beta Expected Return   Cooley, Inc. 1.6 19%   Moyer Co. 1.2 16%   What would the risk-free rate have to be if these securities are correctly priced?

Question

Suppose you observed the following situation:

 

Security Beta Expected Return

 

Cooley, Inc. 1.6 19%

 

Moyer Co. 1.2 16%

 

What would the risk-free rate have to be if these securities are correctly priced?

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