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Business, 06.08.2019 02:30 darantjohnson

Suppose the rate of return on short-term government securities (perceived to be risk-free) is about 6%. suppose also that the expected rate of return required by the market for a portfoliowith a beta of 1 is 13%. according to the capital asset pricing model:
a. what is the expected rate of return on the market portfolio?
b. what would be the expected rate of return on a stock with β = 0?
c. suppose you consider buying a share of stock at $40. the stock is expected to pay $3 dividends next year and you expect i t sellthem for $41. the stock risk has been evaluated at β = -.5. is the stock overpriced or underpriced?

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