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Question: Based on the CAPM, the required rate of return on a stock is 12%, the stock is 20 percent more risky than a well-diversified market por olio. Risk free interest rate is 4% and expected return on the market is 10%. What is the market's risk premium? What is the stock's risk premium - in that order?

1. 5%, 6%

2. 6%, 6%

3. 6%, 5%

4. none

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