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Suppose you observe the following situation: Security Beta T22.1 2.31 22.1 T15.0 0.66 15.0 Expected Return Requirement-A. If the current market data shows that the
Suppose you observe the following situation: Security Beta T22.1 2.31 22.1 T15.0 0.66 15.0 Expected Return Requirement-A. If the current market data shows that the risk-free rate is 3.71 percent, are these securities correctly priced? Requirement-B. What would the risk-free rate have to be if these securities are correctly priced? Requirement-C. If these two securities are correctly priced, find the market risk premium (using the findings of Requirement-B). Requirement-D. Draw the Security Market Line (SML) with clear labels, and plot these two securities on the graph along with the market and risk-free rate (using the findings of Requirements B and C). Suppose you observe the following situation: Security Beta T22.1 2.31 22.1 T15.0 0.66 15.0 Expected Return Requirement-A. If the current market data shows that the risk-free rate is 3.71 percent, are these securities correctly priced? Requirement-B. What would the risk-free rate have to be if these securities are correctly priced? Requirement-C. If these two securities are correctly priced, find the market risk premium (using the findings of Requirement-B). Requirement-D. Draw the Security Market Line (SML) with clear labels, and plot these two securities on the graph along with the market and risk-free rate (using the findings of Requirements B and C).
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