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Assume that the CAPM is a good description of stock price returns. The market expected return is 8% with 11% volatility and the risk-free rate
Assume that the CAPM is a good description of stock price returns. The market expected return is 8% with 11% volatility and the risk-free rate is 4%. New news arrives that does not change any of these numbers but it does change the expected return of the following stocks: a. At current market prices, which stocks represent buying opportunities? b. On which stocks should you put a sell order in? Complete the table with the alphas below: (Round to one decimal place.)
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