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Problem 3: Risk-free Rate and Expected Market Return (2 points) Assume that CAPM holds. Stocks A and B have the following characteristics: B Expected return

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Problem 3: Risk-free Rate and Expected Market Return (2 points) Assume that CAPM holds. Stocks A and B have the following characteristics: B Expected return Stock A Stock B 0.5 0.9 5.25% 8.25% a) (1 point) What is the expected market return? 2 b) (1 point) What is the risk-free rate

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