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Expected return varies with beta

The risk free rate is 4% and the expected return on the market portfolio is 12%. Please use the CAPM to answer the following questions.

(a) Draw a graph showing how the expected return varies with beta.

(b) What is the market risk premium?

(d) If an investment with a beta of 0.8 offers an expected return of 9.8%, does it have a positive NPV?

(e) If the market expects a return of 11.2% from a stock, what is its beta?

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Solution Preview :

Prepared by a verified Expert

Finance Basics: Expected return varies with beta

Reference No:- TGS0553636

Have a Question? (oR Write a Review)

Recent Questions Asked Finance Basics

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Solution Preview :

Prepared by a verified Expert

Finance Basics: Expected return varies with beta

Reference No:- TGS0553636

Recent Questions Asked Finance Basics

Q : Find both balance sheet and income statement data

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