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Asset W has an expected return of 21.3 percent and a beta of 2.05. If the risk-free rate is 3.5 percent, what is the market
Asset W has an expected return of 21.3 percent and a beta of 2.05. If the risk-free rate is 3.5 percent, what is the market risk premium? I am using formula Expected return = risk free rate + beta * (market risk premium-risk free rate ). I do know that it is not correct, and the formula has to be Expected return = risk free rate + beta * (market risk premium)
Can somebody explain me why? Thanks.
P.S. correct answer is 8.68292683
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