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Question
Given an expected return for the market of 12 percent, with a standard deviation of 20 percent, and a risk-free rate of 8 percent, consider the following data:Stock Beta Ri(%)
1 0.8 12
2 1.2 13
3 0.6 11
(a) Calculate the required return for each stock using the SML.
(b) Assume that an analyst, using fundamental analysis, develops the estimates labeled Ri for these stocks. Which stock would be recommended for purchase?
Answer
This answer is hidden. It contains 121 characters.
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