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You have been scouring The Wall Street Journal looking for stocks that are good values and have calculated expected returns for five stocks. Assume the
You have been scouring The Wall Street Journal looking for stocks that are good values and have calculated expected returns for five stocks. Assume the risk-free rate (RF) is 5 percent and the market risk premium (rM -RF) is 2.3 percent. Which security would be the best a. Expected Return = 9.01%, Beta = 2 b. Expected Return = 7.0696, Beta=0.5 c. Expected Return = 5.04%. Beta = -0.3 d. Expected Return = 8.74%. Beta = 0.3 e. Expected Return = 11.50%, Beta = 1.8 Oe ob According to pure expectations theory, the maturity risk premium is 2 O-1 OO 02 0 1
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