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According to the capital asset pricing model (CAPM), how does risk affect the expected returns on assets? Explain and draw a graph of the relationship.
According to the capital asset pricing model (CAPM), how does risk affect the expected returns on assets? Explain and draw a graph of the relationship. Calculate the expected return and price of a stock under the following conditions using the Capital Asset Pricing Model (CAPM). Dividend per share: $2 Growth rate of dividends: .05 Beta: 1 Risk free rate of return: .02 Expected market rate of return: .10 Now suppose that the stock's beta rises to 2.0. Will this raise or lower the stock's expected return and the stock's price? Explain why
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