1 The ordinary shares of Firm A have a Beta of 1.23. The risk-free rate of interest...

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1 The ordinary shares of Firm A have a Beta of 1.23. The risk-free rate of interest is 5 per cent, and the risk premium achieved on the market index over the past 20 years has averaged 11.5 per cent p.a. What is the future expected return on A’s shares?

If you believe that overall market returns will fall to 8 per cent in future years, how does your answer change?

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Ali Khawaja

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