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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 Forecasted
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 |
Forecasted return | 12% | 11% |
Standard deviation of returns | 8% | 10% |
Beta | 1.5 | 1.0 |
What would be the fair return for each company, according to the capital asset pricing model (CAPM)? (Do not round intermediate calculations. Omit the "%" sign in your response.) |
Company | Expected Return | |||
$1 Discount Store | % | |||
Everything $5 | % | |||
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