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Suppose the rate of return on short-term government securities (perceived to be risk-free) is about 2%. Suppose also that the expected rate of return on

Suppose the rate of return on short-term government securities (perceived to be risk-free) is about 2%. Suppose also that the expected rate of return on the market is 5% and the portfolio has a beta of 0.8. Therefore, what is the required rate of return on equity?

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