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kodGreya [7K]
3 years ago
6

If you have a strong background in a subject area, you can take this test to earn college credit, available at participating col

leges. You can get up to 45 credits toward a college degree by successfully passing exams.
A) Advanced International Certificate of Education (AICE) Program
B) Advanced Placement (AP)
C) College Level Examination Program (CLEP)
D)International Baccalaureate (IB)
Advanced Placement (AP)
1 answer:
iVinArrow [24]3 years ago
6 0
C) College Level Examination Program (CLEP)
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Stock Y has a beta of 1.0 and an expected return of 12.4 percent. Stock Z has a beta of 6
kotegsom [21]

Answer: Risk free rate = 1.9%

Explanation:

The Capital Asset Pricing Model allows for the calculation of the required return using the market return, beta and risk free rate.

Required return = Risk free rate + Beta * ( Market return - Risk free rate)

First find the market rate. Stock Y is uniquely positioned to help with that:

12.4% = Risk free rate + 1.0 * (Market return - Risk free rate)  

12.4% = rf + Market return - rf  

Market return = 12.4%

Apply this to the formula using Stock Z:

8.2% = rf + 0.6 * (12.4% - rf)  

8.2% = rf + 7.44% - 0.6rf  

rf - 0.6rf = 8.2% - 7.44%  

0.4rf = 0.76%  

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Risk free rate = 1.9%

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