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38. Stock A has a beta of 1.2 and an expected return of 11% according to the CAPM. The risk free rate is 5%. A.
38. Stock A has a beta of 1.2 and an expected return of 11% according to the CAPM. The risk free rate is 5%. A. Using the information for stock A, draw the CAPM on the figure below. (1 pts.) B. Indicate where the market portfolio lies on the CAPM and label it M. (1 pts.) C. Assume Stock B has a beta of 0.6 but it is undervalued relative to the CAPM required return. Plot it on the figure below. Note that you can't determine the exact return but do know the risk. (1 pts.)
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