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-15 Yesterday, Susan determined that the risk-free rate of return, fre, is 3 percent, the required return on the market portfolio, rm, is 10 percent,
-15 Yesterday, Susan determined that the risk-free rate of return, fre, is 3 percent, the required return on the market portfolio, rm, is 10 percent, and the required rate of return on Stock Krk, is 17 percent. Today, Susan received new infor- mation that indicates investors are more risk averse than she thought, such that the market risk premium, RPM, actually is 1 percent higher than she estimated yesterday. When Susan considers the effect of this change in risk premium, what will she determine the new rk to be? 1 T
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