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7. (a) Consider the information for the following stocks: Correlation Coefficient SD of j Stock j j with M 0.5 0.3 0.25 0.30 E( ,)-0.12,

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7. (a) Consider the information for the following stocks: Correlation Coefficient SD of j Stock j j with M 0.5 0.3 0.25 0.30 E( ,)-0.12, P,-0.05, d'i%):0.01 (1) Using the above information calculate (i) betas for stod and stock X and (ii) for an equally weighted portfolio of stocks and X [5 marks] (2) Calculate the equilibrium expected retum according to the capital asset pricing model (CAMP) for stock and X and (ii) the portfolio indicated in problem 7(1)ii [5 marks]

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