1. The outstanding bonds of Roy Thomas, Inc. provide a real rate of return of 4.1 percent. The current rate of inflation is 2.4 percent. What is the nominal rate of return on these bonds?
A 6.50 percent
B 6.60 percent
C 1.02 percent
D 1.70 percent
F 1.07 percent
2. Security X has an expected rate of return of 13% and a beta of 1.15. The risk-free rate is 5% and the expected market risk premium is 6%. According to the capital asset pricing model (CAPM), security X is ____________ .
a. fairly priced
b. overpriced
c. underpriced
d. None of the above answers are correct