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a. Draw a Security Market Line that has an Expected Return on the Market of 11% and the risk-free rate of 4%. b. Assume that

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a. Draw a Security Market Line that has an Expected Return on the Market of 11\% and the risk-free rate of 4%. b. Assume that you have a security A, that has a Beta of 1.2 and an expected return of 14%. Plot this on your graph. Would you buy this asset? Why or why not? c. Assume that you have security B, that has a Beta of 0.8 and has an expected return of 8%. Plot this on the graph. Would you buy this asset? Why or why not? d. A share of stock with a beta of 0.75 sells for $50. Investors expect the stock to pay a year-end dividend of $2. If the stock is perceived to be fairly priced today, what must be investors' expectation of the price of the stock at the end of the year? e. Reconsider the stock in part d. Suppose investors actually believe the stock will sell for $52 at year-end. Is the stock a Bood or bad buy (if it currently sells for $50)

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