Question
Please help me with the questions below: 1. Stock A has a Beta of 0.6. The risk-free rate is 1.6% and the market portfolio is
Please help me with the questions below:
1. Stock A has a Beta of 0.6. The risk-free rate is 1.6% and the market portfolio is expected to return 9.9%. Use the CAPM to find the stocks equilibrium expected return. Express your answer as a percentage with 3 digits after the decimal point, but omit the % sign.
2. Stock B has a Beta of 2. The risk-free rate is 1.7% and the market portfolio is expected to return 8.8%. You have estimated the stocks actual expected return to be 15.5%. Use the CAPM, along with the expected return, to determine the stocks Jensens Alpha. Express your answer as a percentage with 3 digits after the decimal point, but omit the % sign. If the value of Alpha is negative, make sure to include the negative sign in your answer.
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