Question

Asked Dec 8, 2019

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Compute the expected rate of return on investment i given the following

information: Rf = 8%; E(RM) = 14%; βi = 1.0.

b. Recalculate the required rate of return assuming βi is 1.8.

25. a. Compute the expected rate of return on investment i given the following

information: the market risk premium is 5%; Rf = 6%; βi = 1.2.

b. Compute E(RM)

Step 1

Expected rate of return is the minimum return which the investors would require for investing in a stock. Using Capital Asset Pricing Model, this value can be determined.

Step 2

Answer: Expected rate of return on investment i is 14.00%

Step 3

b) Expected rate of return on inve...

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