Risk premium on carry arbitrage

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Reference no: EM132023617

1. You have a portfolio with a beta of 1.74. What will be the new portfolio beta if you keep 89 percent of your money in the old portfolio and 11 percent in a stock with a beta of 0.74? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

2. Why does a market participant not earn a risk premium on a carry arbitrage?

3. Explain the difference in the cost of retained earnings and the cost of issuing a new common stock.

Reference no: EM132023617

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