Question
2. Consider the following information on the returns on the market and Fuji stock. Type of Economy Expected Return on Market (%) Expected Return on
2. Consider the following information on the returns on the market and Fuji stock.
| Type of Economy | Expected Return on Market (%) | Expected Return on Fuji (%) |
| Bear | 2.50% | 3.40% |
| Bull | 16.3 | 12.8 |
a. Calculate the beta of Fuji. What is the responsiveness of Fujis return to movements of the market?
b. Suppose the estimate of expected return on the market is E4.0 percent when the type of economy is Bear. Using your answer in part (a), what should the expected return on Fuji
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Public Finance
Authors: Harvey Rosen, Ted Gayer
10th edition
9781259716874, 78021685, 1259716872, 978-0078021688
