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How did they solve the problem? PLease add step by step.They are using CAPM Firm A and B each have a beta of 1.5 and

image text in transcribedHow did they solve the problem? PLease add step by step.They are using CAPM

Firm A and B each have a beta of 1.5 and 2, and expected return of 7% and 8%. What is the risk-free rate and expected market return? 7% - Rf = 1.5(Rm Rf), 8% - Rf = 2(Rm Rf) Solve for equations we get Rf = 4%, Rm = 6%

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