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Determining NPV of a Treasury Bill

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The Treasury bill rate is 4 percent, and the expected return on the market portfolio is 12 percent. Using the capital asset pricing model:

If an investment with a beta of .8 offers an expected return of 9.8 percent, does it have a positive NPV?

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Solution Summary

Brief calculations show how to find out whether a bill has a positive NPV given its expected return, bill rate and beta.

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