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Consider the equation for the Capital Asset Pricing Model (CAPM): Cov(ri, rM) In this equation, the term TRF represents the rate of return on a
Consider the equation for the Capital Asset Pricing Model (CAPM): Cov(ri, rM) In this equation, the term TRF represents the rate of return on a risk-free bond Suppose that the market's average excess return on stocks is 6.00% and that the risk-free rate is 1.00%. Complete the following table by computing expected returns to stocks for each beta coefficient using the Capital Asset Pricing Model (CAPM): bi -0.50 0.30 1.00 3.00 Return to Stocks (90) 2.80 7.00 -2.00
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