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Question 6 Using monthly returns from 1990 2001, you estimate that Microsofts beta is 1.49 (std err = 0.18) and Gillettes beta is 0.81 (std

Question 6

Using monthly returns from 1990 2001, you estimate that Microsofts beta is 1.49 (std err = 0.18) and Gillettes beta is 0.81 (std err = 0.14). Average risk-free rate is 5%, and the average market risk premium is 6%.

If these estimates are a reliable guide going forward, what expected rate of return should you require for holding each stock?

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