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    Required rate of return

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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 that has a beta of 1.2?

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    Solution Preview

    The return can be calculated using the CAPM equation
    Expected return = Rf + (Rm-Rf) ...

    Solution Summary

    The solution explains how to calculate the required rate of return given the beta