Beta example capm example consider the betas for each

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Unformatted text preview: expected return for each? premium Security DCLK KO INTC KEI Beta 2.685 0.195 2.161 2.434 Expected Return 2.13 + 2.685(8.6) = 25.22% 2.13 + 0.195(8.6) = 3.81% 2.13 + 2.161(8.6) = 20.71% 2.13 + 2.434(8.6) = 23.06% Figure 13.4 Figure Comprehensive Problem Comprehensive The risk free rate is 4%, and the required return The on the market is 12%. What is the required return on an asset with a beta of 1.5? return What is the reward/risk ratio? The reward/risk ratio is 8% What is the required return on a portfolio What consisting of 40% of the asset above and the rest in an asset with an average amount of systematic risk? systematic R = .04 + 1.5 x (.12 - .04) = .16 R = (.4 x .16) + (.6 x .12) = .136 (.4...
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