a)12%

b)5%

c)E(r)=rf+b*(E(rm)-rf),(b stands for beta),i.e. E(r)=5%-0.5*(12%-5%)=1.5%

Expected return in the second year is E(r2)=(D+P1-P0)/P0=(3+ 41-40)/40=10%>1.5%, so it is undervalued

2. E(rp)=rf+b*(E(rm)-rf)=6%+b*(14%-6%)=18%, so beta b=1.5

3. Is there a lesser condition, I don't know how to do it.