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Problem:

Security A has an expected return of 10.4 percent with a standard deviation of 12 percent, and a correlation with the market of 0.75. Security B has an expected return of -0.70 percent with a standard deviation of 20 percent, and a correlation with the market of 0.60. The standard deviation of r_m is 12 percent.

Requirement:

Question 1: What are the beta coefficients of A and B?

Question 2: If the risk free rate is 6 percent, what is the value of r_m?

Note: Please provide through step by step calculations.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91170783

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