3) Stock A has a beta of 0.6 and investors expect it to return 8%. Stock B has a beta of 1.4 and investors expect it to return 16%. Use the CAPM to find the market risk premium and the expected rate of return on the market.
3) Stock A has a beta of 0.6 and investors expect it to return 8%. Stock B has a beta of 1.4 and investors expect it to return 16%. Use the CAPM to find the market risk premium and the expected rate of return on the market.
Chapter6: Risk And Return
Section: Chapter Questions
Problem 14P
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Transcribed Image Text:3) Stock A has a beta of 0.6 and investors expect it to return 8%. Stock B has a beta of 1.4 and
investors expect it to return 16%. Use the CAPM to find the market risk premium and the
expected rate of return on the market.
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