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In period 0, the market price for a security is $40, the security's expected rate of return is 13%, the riskless rate of interest is
In period 0, the market price for a security is $40, the security's expected rate of return is 13%, the riskless rate of interest is 7%, and the expected market risk premium is 8%. a) What is the security's expected price next period? b) What will be the security's current price if its expected future price remains the same but the covariance of its return with the return on the market portfolio doubles? c) What will be the security's current price if its expected future price remains the same but the variance of the market portfolio returns doubles? In period 0, the market price for a security is $40, the security's expected rate of return is 13%, the riskless rate of interest is 7%, and the expected market risk premium is 8%. a) What is the security's expected price next period? b) What will be the security's current price if its expected future price remains the same but the covariance of its return with the return on the market portfolio doubles? c) What will be the security's current price if its expected future price remains the same but the variance of the market portfolio returns doubles
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