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You have observed the following returns over time: Year Stock X 2017 12% 2018 17 2019 -17 2020 2...

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You have observed the following returns over time: Year Stock X 2017 12% 2018 17 2019 -17 2020 2 2021 23 Assume that the risk-free rate is 5% and the market risk premium is 4%. a. What are the betas of Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: Stock Y: b. What are the required rates of return on Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: % % Stock Y 13% 8 -3 1 11 % Market 13% 8 -13 2 12 Stock Y: c. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Do not round intermediate calculations. Round your answer to two decimal places.

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a To calculate the betas of Stocks X and Y we can use the Capital Asset Pricing Model CAPM formula Beta Covariance Stock Market Variance Market Let s View the full answer


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Related Book For  answer-question
Intermediate Financial Management

Intermediate Financial Management

ISBN: 9780357516669

14th Edition

Authors: Eugene F Brigham, Phillip R Daves

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Question Details
Chapter # 2
Section: Problems
Problem: 14
Posted Date: September 01, 2023 09:16:53
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