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(b) You are convinced your company which has a beta of 1.3 will earn a return of 15% the coming year. It is Observed that

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(b) You are convinced your company which has a beta of 1.3 will earn a return of 15% the coming year. It is Observed that the expected rate of return on the market is 13% and the rate on T-Bills is 5%. Based on your firm's level of risk, determine the return it should earned and based on your position state, giving reasons if the firm over or under valued. (7 marks)

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