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A stock has a beta of 1.5. The market's expected total return is 10% pa and the risk free rate is 5% pa, both given
A stock has a beta of 1.5. The market's expected total return is 10% pa and the risk free rate is 5% pa, both given as effective annual rates. In the last 5 minutes, bad economic news was released showing a higher chance of recession. Over this time the share market fell by 1%. The risk free rate was unchanged. What do you think was the stock's historical return over the last 5 minutes, given as an effective 5 minute rate? (a) -12.5% (b) -4% (c) -1.5% (d) -1% (e) 12.5%
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