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Suppose the rate of return on short-term government securities (perceived to be risk-free) is 5%. Suppose also that the expected rate of return required by

Suppose the rate of return on short-term government securities (perceived to be risk-free) is 5%. Suppose also that the expected rate of return required by the market for a portfolio with a beta of 1 is 12%. According to the CAPM:

Please show your work

A.What is the expected rate of return on the market portfolio?

B.What would be the expected rate of return on a stock with = 0?

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