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    Calculating expected market retun & return on a stock

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    Assume that the risk-free rate is 5% and the market risk premium is 6%. What is the expected return for the overall stock market? What is the required rate of return on a stock that has a beta of 1.2?

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    Expected return for overall stock market=risk free rate+ market risk premium

    Solution Summary

    Solution describes the methodology to calculate expected market return and required rate of return on a stock.