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4. a. You expect an RFR of 10 percent and the market return (RM) of 14 percent. Compute the expected return for the following stocks,
4. a. You expect an RFR of 10 percent and the market return (RM) of 14 percent. Compute the expected return for the following stocks, and plot them on an SML graph. Stock Beta E(R) U N 0.85 1.25 D -0.20 b. You ask a stockbroker what the firm's research department expects for these three stocks. The broker responds with the following information: Stock Current Price Expected Price Expected Dividend U 22 24 0.75 N 48 51 2.00 D 37 40 1.25 3 indicate what actions you would take with regard to these stocks. Explain your decisions(sell or buy)
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