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a) Assume that the risk free rate is 6.5% and that the expected return on the market is 13%. What is the required rate of

a) Assume that the risk free rate is 6.5% and that the expected return on the market is 13%. What is the required rate of return on a stock that has a beta of 0.6?

b) As a risk averse investor, which of the following rules would you use when choosing between two securities A and B?

  • A. Choose the one with the higher return when both A and B have the same risk
  • B. Choose the one with the lower risk when both A and B have same return
  • C. Use the CV to calculate the risk per unit of return when A and B have different risks and return
  • D. All of the above

c) A portfolio consisting of all stocks (market portfolio) has a beta of?

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