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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 short-term government securities (perceived to be risk-free) is about 4%. Suppose also that the expected rate of return required on the market portfolio is 16%. According to the CAPM and using the SML: Question 52 pts Question 2a What is the expected rate of return on the portfolio with \beta =1?(If your solution is 13.24%, please enter 0.1324 in the box.) Question 2 b What would be the expected rate of return on a stock with \beta =0?Suppose you are considering buying a share of stock at $ 30. The stock is expected to pay a dividend of $ 2 next year and you expect to sell it then for $ 31. What is your expected rate of return on this stock? (If your solution is 13.24%, please enter 0.1324 in the box.) Question 82 pts Question 2c-2 The stock risk has been evaluated at \beta =-0.25. What is its implied expected return using SML?(If your solution is 13.24%, please enter 0.1324 in the box.) Question 91 pts Question 2c-3 Comparing your expectation with the market evaluation, is the stock overpriced or underpriced?

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