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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?

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    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