The returns on each of the three stocks are positively correlated, but they are not perfectly correlated.ExpectedStandardStockReturnDeviationBetaStock A10%20%1.0Stock B10201.0Stock C12201.4The risk-free rate is 5%. The required returns equal expected returns. What is the market risk premium?а.4.0%b. 4.5%C.5.0%d. 5.5%A stock has an expected return of 12% percent. The beta of the stock is 1.2 and the risk-free rate is 7%. What is themarket risk premium?а.2.50%b.3.50%С.4.17%d.5.33%Calculate the beta of the stock that has a required rate of return of 14%. The risk-free rate of return is 5% and that themarket risk premium is 7%.а.1.25b. 1.29С.1.50d. 1.83

As per CAPM Ri = Rf + B (Rm - Rf) Where Ri = Return on equity Rf = Risk free rate of return B =…

Answered: The returns on each of the three stocks…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question
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