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8) Here are data on two companies. The T-bill rate is 3% and the market risk premium is 6%. Company Company Company Forecast return 10%
8) Here are data on two companies. The T-bill rate is 3% and the market risk premium is 6%. Company Company Company Forecast return 10% 8% Beta 1.3 0.8 a) (10 points) What would be the fair return for each company, according to the capital asset pricing model (CAPM)? b) (5 points) is the stock of Company A overpriced or underpriced? Why? Is the stock of Company B overpriced or underpriced? Why
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