Question

Sante Capital operates two mutual funds headquartered in? Houston, Texas. The firm is evaluating the stock of four different firms for possible inclusion in its fund holdings. As part of their? analysis, Sante's managers have asked their junior analyst to estimate the? investor-required rate of return on each? firm's shares using the CAPM and the following? estimates: The rate of interest on? short-term U.S. Treasury securities is currently 3.5 ?percent, and the expected return for the market portfolio is 8.5 percent. What should be the expected rates of return for each? investment?

Security	Beta
A	1.60
B	0.55
C	1.10
D	0.90

Answer 1