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    Expected Return

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    Suppose the expected return on the market portfolio is 13.8 %and the risk free rate is 6.4%. Solomon Inc. stock has a beta of 1.2. Assume the capital-asset-pricing model holds.

    A. What is the expected return on Solomon's stock?
    B. If the risk free rate decreases to 3.5%, what is the expected return on Solomon's stock?

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    https://brainmass.com/business/capital-asset-pricing-model/expected-return-53635

    Solution Preview

    The Capital Asset Pricing Model gives the expected return on a stock as per the equation below :

    Expected Return on Stock = Risk Free ...

    Solution Summary

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

    $2.19

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