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problem: Given the following information, Rf = 0.06, E(RM) = 0.12, σM = 0.15, Answer the given problems below:

[A] Assume a stock has a β of 1.2. Could this stock have a return of .10 in a given year?

[B] find out the β of a security with an equilibrium expected return of 0.03?

[C] Determine the numerical value of the equilibrium risk premium [that is, the excess return on the market portfolio]?

[D] find out the equilibrium expected return on a risky asset with β of 1.2 with β of 0.6?

Is it possible in equilibrium for the expected return on a risky security to be not greater than the risk-free rate?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M919151

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