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The risk free rate is 3.8%, the return on the market 10%, and the beta of a stock is .8. 1. Calculate the required rate
The risk free rate is 3.8%, the return on the market 10%, and the beta of a stock is .8.
1. Calculate the required rate of return, the market risk premium and the security risk premium.
2. Graph the security market line and identify on the graph the market risk premium and the security risk premium.
3. What will happen to the SML if the inflation rate increases?
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