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Suppose the expected return of stock i is given by E(Ri)=Rf+i[E(RM)Rf]. Stocks A, B, and C have betas of 1.5, 0.5, and 1.2, respectively (see
Suppose the expected return of stock i is given by E(Ri)=Rf+i[E(RM)Rf]. Stocks A, B, and C have betas of 1.5, 0.5, and 1.2, respectively (see the table below). The values for Rfand E(RM) are 3% and 15% per year.
i | |
Stock A | 1.5 |
Stock B | 0.5 |
Stock C | 1.2 |
Based on the above information, which stock is expected to earn a return of 9%?
Group of answer choices
1) Stock A and B
2) Stock A
3) Stock B
4) Stock C
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