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What is the expected risk- free rate of return if asset X, with a beta of 1.5, has an expected return of 20 percent, and
What is the expected risk- free rate of return if asset X, with a beta of 1.5, has an expected return of 20 percent, and the expected market return is 15 percent? Can please explain how to solve this problem step by step.
I need help solving after this point?
Expected return of Stock = risk- free rate of return + Beta*( expected market return - risk- free rate of return)
20% = risk- free rate of return + 1.5* (15% - risk- free rate of return)
0.20 = Risk free rate of return +(1.5*0.15) (1.5 * Risk free rate of return)
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