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Question
Stock A is a risky asset that has a beta of 1.4 and an expected return of 13.2 percent. Stock B is also a risky asset and has a beta of 1.25. The risk-free rate is 5.5 percent. Assuming both stocks are correctly priced, what is the expected return on stock B?A. 11.90 percent
B. 12.11 percent
C. 12.29 percent
D. 12.38 percent
E. 12.46 percent
Answer
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