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= Ex. Suppose security markets are in equilibrium and CAPM holds. We know that Em = 10% and r1= 5%. We have the following information

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= Ex. Suppose security markets are in equilibrium and CAPM holds. We know that Em = 10% and r1= 5%. We have the following information about two stocks and the market portfolio. What return do investors expect on stocks A and B? Stock A o(%) 20 Pim .4 B 30 .6 m 25

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