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Use the following for the next two questions: You note the following: expected return on the market-1 of a stock relative to the market is

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Use the following for the next two questions: You note the following: expected return on the market-1 of a stock relative to the market is 1 4%, risk free rate-5%, the beta 0%, expected inflation rate .2, and the beta of this stock relative to inflation is 0.5. 25. According the CAP a. 10% b. 11% c. 12% d. 13% e. 14% M, what is the expected return on this stock? 26. According to a two factor APT model where the factors are the market and inflation, what is the expected return on this stock? a. 1096 b. 1196 C. 12% d. 13% e. 14%

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