We know that two stocks A and B are correctly priced by the CAPM model. For A,

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We know that two stocks A and B are correctly priced by the CAPM model. For A, the expected return is 12%, and the beta is 1.5; for B, the expected return is 6%, and the beta is 0.5.

What are the values of risk-free rate and market risk premium?

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Microeconomics An Intuitive Approach with Calculus

ISBN: 978-0538453257

1st edition

Authors: Thomas Nechyba

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Posted Date: May 04, 2023 03:15 AM

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We know that two stocks A and B are correctly priced by the CAPM model. For A,

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We can use the CAPM equation to solve for the riskfree rate and market risk premium The CA... View the full answer

Microeconomics An Intuitive Approach with Calculus

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