GEN COMBO LOOSELEAF INVESTMENTS; CONNECT ACCESS CARD
GEN COMBO LOOSELEAF INVESTMENTS; CONNECT ACCESS CARD
11th Edition
ISBN: 9781260201550
Author: Bodie
Publisher: MCG
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Chapter 9, Problem 4PS
Summary Introduction

Adequate information:

T bill rate = 4%

Market risk premium = 6%

Beta of $1 Discount store = 1.5

Beta of Everything $5 = 1.0

To compute:

Expected return of $1 Discount store and everything $5 as per CAPM

Introduction:

Expected return of the security as per CAPM is given by:

Expected return = Risk free rate + Beta of the security X Market risk premium

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