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Suppose we have the following information about two stocks: Expected Return Beta Stock 1 10% 1.6 Stock 2 4% 0.4 If the CAPM holds, what is the risk-free interest rate, the expected stock market return, and the market risk premium?

(hint: Use CAPM equation for each separately; plug in known values and see if you can find unknown parameters through the two equations.

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Financial Management, Finance

Category:- Financial Management
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