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karen Kay a portfolio manager at collins asset management, is using capital asset pricing model for making recommendations to his clients. Her research department has

karen Kay a portfolio manager at collins asset management, is using capital asset pricing model for making recommendations to his clients. Her research department has developed the information shown in the following exhibit: Forecast return STD Deviation Beta Stock X 14% 36% 0.8 Stock Y 17% 25% 1.5 Market Index 14% 15% 1.0 Risk Free 5% 0% 0%

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