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8. The Treasury bill rate is 4 percent, and the ex...

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8. The Treasury bill rate is 4 percent, and the expected return on the market portfolio is 12 percent. Using the capital asset pricing model: a. Draw a graph similar to Figure 8.7 showing how the expected return varies with beta. b. What is the risk premium on the market? c. What is the required return on an investment with a beta of 1.5? d. If an investment with a beta of .8 offers an expected return of 9.8 percent, does it have a positive NPV? e. If the market expects a return of 11.2 percent from stock X, what is its beta?

 

Paper#9338 | Written in 18-Jul-2015

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