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Calculate the required rate of return on a security

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Reference no: EM132757641

Question: 1. A stock with a beta of 1.1 has an expected rate of return of 12%. If the market return this year turns out to be 9 percentage points below expectations, what is your best guess as to the rate of return on the stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

2. The risk-free rate is 3% and the expected rate of return on the market portfolio is 8%.

a. Calculate the required rate of return on a security with a beta of 2.16. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

b. If the security is expected to return 13%, is it overpriced or underpriced?

Reference no: EM132757641

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