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please correct Suppose the yield on short-term government securities (perceived to be risk-free) is about 6%. Suppose also that the expected return required by the
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Suppose the yield on short-term government securities (perceived to be risk-free) is about 6%. Suppose also that the expected return required by the market for a portfolio with a beta of 1 is 14.0%. According to the capital asset pricing model: a. What is the expected return on the market portfolio? (Round your answer to 1 decimal place.) Expected rate of returrn b. What would be the expected return on a zero-beta stock? Expected rate of return 14.0% 60% Suppose you consider buying a share of stock at a price of $45. The stock is expected to pay a dividend of $4 next year and to sell then for $47. The stock risk has been evaluated at B-0.5. c-1. Using the SML, calculate the fair rate of return for a stock with a p--0.5. (Round your answer to1 decimal place.) Fair rate of return 50 % c-2. Calculate the expected rate of return, using the expected price and dividend for next year. (Round your answer to 2 decimal places.) Expected rate of return 13.33 % C-3. Is the stock overpriced or underpriced? Underpriced OverpricedStep by Step Solution
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