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Question 2 (13 points - 6+7): The risk-free rate is 4% per year. The expected return on the S&P 500 index, which turns out to
Question 2 (13 points - 6+7): The risk-free rate is 4% per year. The expected return on the S&P 500 index, which turns out to be the tangency portfolio of stocks in the economy, is 10%, with a standard deviation of returns of 16% per year. The expected return of Microsoft is unknown, but it has a standard deviation of 30% per year, and a covariance with the S&P 500 index of 0.20. Compute Microsoft's beta and expected return. ii) If Intel has a third the expected return of Microsoft, then what is Intel's beta
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