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Assume the risk free rate equals Rf = 4% and the return on the market portfolio has expectation E

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Assume the risk free rate equals Rf = 4% and the return on the market portfolio has expectation E [ Rm ] = 12% and standard deviation sm = 15%;(The m after the R and the m after the s are subscripts, as if the f after the R in the risk free rate);a) What is the equilibrium risk premium (that is, the excess return on the market portfolio)?;b) If a certain stock has a realized return of 14% what can we say about the beta of this stock?;c) If a certain stock has an expected return of 14%, what can we say about the beta of this stock?;Additional Requirements;Level of Detail: Show all work

 

Paper#30328 | Written in 18-Jul-2015

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