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Andrej [43]
2 years ago
11

Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 4.5%, and the market is in equilib

rium. (That is, required returns equal expected returns.) What is the market risk premium (rM - rRF)
Business
1 answer:
seraphim [82]2 years ago
3 0

The market risk premium of Fund P will be 5.5%.

<h3>How to calculate the market risk premium?</h3>

It should be noted that as per CAPM, the return in stock will be:

= Risk free rate + Beta × Market risk premium

8.90% = 4.5% + 0.8 × Market risk premium.

Market risk premium = 5.5%

In conclusion, the market risk premium of Fund P will be 5.5%.

Learn more about market risk premium on:

brainly.com/question/17135853

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Based on the economic and financial analysis, the main reason for considering <u>nonconstant growth</u> in dividends is to allow for "<u>Supernormal</u>" growth rates over "<u>some finite length of time</u>."

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