Question
2. Historical rates of return for the market and for Stock A are given below: State of Nature Market Stock A Good market 20.00% 8.00%
| 2. Historical rates of return for the market and for Stock A are given below: | ||||||
| State of Nature | Market | Stock A | ||||
| Good market | 20.00% | 8.00% | ||||
| Bad Market | -1% | 3% | ||||
Assume these are the only two states of nature that can occur, and that there is a 50% chance of either state of nature occurring. If the risk-free rate is 6 percent, what is the required return on Stock A, according to CAPM/SML theory?
Please use excel to answer!
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International Financial Management
Authors: Cheol Eun, Bruce Resnick
5thEdition
0073382345, 9780073382340
