Question
Your boss has given you the following information about two stocks. Stock ticker Beta Expected return UU 1.82 19.75% QQ 0.75 8.45% He also told
Your boss has given you the following information about two stocks.
| Stock ticker | Beta | Expected return |
| UU | 1.82 | 19.75% |
| | 0.75 | 8.45% |
He also told you that CAPM holds and that these stocks are fairly priced, that is, priced according to CAPM. Answer the following questions.
(Round your final answers to 2 decimal places)
[Total marks: 5 + 5 = 10 marks]
- Calculate the risk-free rate. [5 marks]
- Calculate the expected return on the market. [5 marks]
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International Financial Management
Authors: Geert Bekaert, Robert J. Hodrick
1st Edition
0131163604, 9780131163607
