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Suppose the rate of return on short - term government securities ( perceived to be risk - free ) is about 4 % . Suppose
Suppose the rate of return on shortterm government securities perceived to be riskfree is about Suppose also that the expected rate of return required on the market portfolio is According to the CAPM and using the SML: Question pts Question a What is the expected rate of return on the portfolio with beta If your solution is please enter in the box. Question b What would be the expected rate of return on a stock with beta Suppose you are considering buying a share of stock at $ The stock is expected to pay a dividend of $ next year and you expect to sell it then for $ What is your expected rate of return on this stock? If your solution is please enter in the box. Question pts Question c The stock risk has been evaluated at beta What is its implied expected return using SMLIf your solution is please enter in the box. Question pts Question c Comparing your expectation with the market evaluation, is the stock overpriced or underpriced?
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