Suppose capital is risky and pays gross real rates of return of 1.2, 1.1, and 0.9 with
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Suppose capital is risky and pays gross real rates of return of 1.2, 1.1, and 0.9 with probabilities .1, .7, and .2, respectively. A risk-free asset pays a safe gross real rate of return of 1.04. What is the expected rate of return on capital? What is the risk premium of capital?
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To calculate the expected rate of return on capital we merely multiply eac...View the full answer
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Sumit kumar
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QUATERNARY Pursuing M.Tech.(2017-2019) in Electronics and Communication Engg. (VLSI DESIGN) from
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Related Book For 
Modeling Monetary Economies
ISBN: 978-1107145221
4th Edition
Authors: Bruce Champ, Scott Freeman, Joseph Haslag
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