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Please answer a, b and c. Show all working thank you!! Assume that the risk-free rate, RF, is currently 8%, the market return, rm, is
Please answer a, b and c. Show all working thank you!!
Assume that the risk-free rate, RF, is currently 8%, the market return, rm, is 12%, and asset A has a beta, bA, of 1.10. a. Use the Capital Asset Pricing Model (CAPM) to calculate the required return, rA, on asset A. 2 marks b. Draw the security market line (SML) on a set of "non-diversifiable risk ( x axis) and required return ( y axis)" axes. 3 marks c. Assume that as a result of recent economic events, inflationary expectations have declined by 2%, lowering the risk free rate (RF) and the market return (rm) to 6% and 10%, respectively. Calculate the new required return for asset A. 2 marksStep by Step Solution
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