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Capital asset pricing model)Anita, Inc. is considering the following investments. The current rate on Treasury bills is 5 percent, and the expected return for the
Capital asset pricing model)Anita, Inc. is considering the following investments. The current rate on Treasury bills is
5
percent, and the expected return for the market is
14.5
percent. Using the CAPM, what rates of return should Anita require for each individual security?
Stock | Beta |
---|---|
H | 0.98 |
T | 1.45 |
P | 0.89 |
W | 1.43 |
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Part 1
a.The expected rate of return for security H, which has a beta of
0.98,
is
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