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). THIS PROBLEM INCLUDES 3 PARTS. 1.If the risk-free rate (as reflected by Company X returns) is 0.10, the average market return (as indicated by
). THIS PROBLEM INCLUDES 3 PARTS.
1.If the risk-free rate (as reflected by Company X returns) is 0.10, the average market return (as indicated by the 1-year return on Company Z) is 20.63, and the company has a beta coefficient of 0.74, what is the appropriate required return
(rounded to two decimal places)?
2. Assume the following for stock XYZ:
rfr = 3%
rm = 10%
B = 0.75
By using CAPM, calculate the required rate of return to decide to invest in XYZ:
3. Amandeep wants to calculate the expected rate of return for security for her work as a freelance investment banker. Lovepreet has the following figures to calculate the required rate of return using CAPM: the risk-free rate is 4%, the expected return of the market is 12%, and the systematic risk b of the security is 1.3. SHOW ALL YOUR STEPS AND CALCULATIONS. -So what does this mean to the potential investor? -What are the conclusions you can say about CAPM?
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