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EpiscoWhat EpiscoWhat
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6 years ago
Suppose that the risk-free rate is 5% and the market portfolio has an expected return of 13% with a volatility of 18%.  Luther Industries has a volatility of 24% and a correlation with the market of .5.  If you assume that the CAPM assumptions hold, then what is the expected return on Luther stock?
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Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
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wrote...
6 years ago
bMonsters =   =   = .66667
ri = rf + b(E[RMkt] - rf)
= .05 + .66667(.13 - .05) = .103333
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