Check my workCheck My Work button is now enabled

Item 15

Item 15 0.5 points

Suppose that the Treasury bill rate is 9% rather than 4%, as we assumed in Table 12.1, and the expected return on the market is 13%. Use the betas in that table to answer the following questions.

a. When you assume this higher risk-free interest rate, what makes sense for how you should modify your assumption about the rate of return on the market portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

b. Recalculate the expected return on the stocks in Table 12.1. (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

c. Suppose now that you continued to assume that the expected return on the market remained at 13%. Now what would be the expected returns on each stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)