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Here are data on two companies. The T-bill rate is 4% and the market risk premium is 6%. Company $1 Discount Store Everything $5 Forecast
Here are data on two companies. The T-bill rate is 4% and the market risk premium is 6%.
Company | $1 Discount Store | Everything $5 | |||
Forecast return | 12 | % | 11 | % | |
Standard deviation of returns | 8 | % | 10 | % | |
Beta | 1.5 | 1.0 | |||
What would be the expected rate of return for each company, according to the capital asset pricing model (CAPM)?
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