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2.) If the US T-Bond rate is 5.00% (TRF = 5%), the required return on the stock market is 11% (rm = 11%). What is
2.) If the US T-Bond rate is 5.00% (TRF = 5%), the required return on the stock market is 11% (rm = 11%). What is the required rate of return for Stock REB if the company's beta is 0.5 (b; = 0.5),? a.) Use the SML equation to calculate PREB (the required return for REB. SML: ri = PRE + (rm - PRF)b Required Rate of Return (%) SML: 1:=1RF+ (n - IRF)bi IM Market risk premium IRF 0.5 1.0 Risk, b: b.) Identify PREB it on the graph below. c.) Calculate the Market Risk Premium (RPM). d.) What is beta for the market portfolio? e.) Is REB more or less risky than the stock market
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