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Given a real rate of interest of 0.5%, an expected inflation premium of 5.2%, and risk premiums for investments A and B of 6.8% and

Given a real rate of interest of 0.5%, an expected inflation premium of 5.2%, and risk premiums for investments A and B of

6.8% and 10.6% respectively, find the following:

a. The risk-free rate of return, rf

b. The required returns for investments A and B

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Part 1

a. The risk-free rate of return is .%.

(Round to one decimal place.)

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