Question
A- A share has a Beta of 0.9. A financial analyst gives it an expectation of yield of 13%. The risk-free rate is 8% and
A- A share has a Beta of 0.9. A financial analyst gives it an expectation of yield of 13%. The risk-free rate is 8% and the risk premium of the market portfolio of 6%. Is the financial analyst optimistic or pessimistic by attributing an expected return of 13% to the share in question? B- The Nofun Ltd share has a Beta of 1 and a very high specific risk. If the expected market return is 20%, the expected return of Nofun Ltd. will be : a- 10% if the risk-free interest rate is 10%; b- 10% if the risk-free interest rate is 10%. b- by 20%. c- more than 20% because of the high specific risk d- undetermined unless the risk-free interest rate is also known. Which answer is correct? Briefly state why.
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