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    Answer to "expected return" question

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    Suppose the expected return on the market portfolio is 14.7 percent
    and the risk-free rate it 4.9 percent.
    Morrow Inc. stock has a beta of 1.3
    Assume the capital-asset-pricing model holds.

    What is the expected return on Morrow's stock?

    If the risk-free decreases to 4 percent, what is the expected return on Morrow's stock?

    © BrainMass Inc. brainmass.com June 3, 2020, 6:44 pm ad1c9bdddf
    https://brainmass.com/business/capital-asset-pricing-model/answer-expected-return-question-72925

    Solution Preview

    Use the CAPM equation to calculate the expected return.
    Expected Return = Risk Free Rate ( Market Return - Risk Free Rate ) X ...

    Solution Summary

    The solution explains how to calculate the expected return using the CAPM equation

    $2.19

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