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Hi John.
Fantastic work on the F9 lectures. They have been of immense help. I have got a question : Using CAPM, Why would any rational investor want to buy securities with a rate of return less than the risk free market rate?
Cheers
The return will only ever be less than the risk free rate if the beta of the investment is negative. (When beta = 0 then the return is equal to the risk free rate)
Negative betas are very unusual (and do not happen in the exam) – the only really practical example is shares in gold mines, because gold tends to increase in value as share prices in general fall (and vice versa).
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