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2) The estimated betas for AOL Time Warner (NYSE: AOL), J.P. Morgan Chase & Company (NYSE: JPM) and The Boeing Company (NYSE: BA) are 2.50,
2) The estimated betas for AOL Time Warner (NYSE: AOL), J.P. Morgan Chase & Company (NYSE: JPM) and The Boeing Company (NYSE: BA) are 2.50, 1.50, and 0.80, respectively. The risk-free rate of retu 4.35 perce three stocks using the CAPM. nt, and the equity risk premium is 8.04 percent. Calculate the required rates of return for these Explain what is meant by the term "Beta" - Explain the relationship between the required rates of return of these companies and the expected risk faced by investors. Give an example of a situation where the calculated beta of a company would not be useful in - evaluating required rates of return
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