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Suppose CAPM works, and you know that the expected returns on Google and IBM are estimated to be 16.75% and 12.50%, respectively. You have just calculated extremely reliable estimates of the betas of Google and IBM to be 1.50 and 0.93, respectively. Given this data, what is a reasonable estimate of the market risk-premium in percentage (the average/expected difference between the market return and the risk-free rate)? (Allow two decimals in the percentage but do not enter the % sign.)

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Operation Management, Management Studies

Category:- Operation Management
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