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Unformatted text preview: 0.22 E 254.24 1.43 0.2 0.29 100% 1.12 Using the CAPM, here are the expected returns of these securities if I have the same market risk Stock Beta Expected return using CAPM A 0.68 5.89% B 1.01 7.74% C 1.39 9.86% D 1.09 8.18% E 1.43 10.08% I can also find the expected return on the portfolio CAPM=risk free rate of return+Beta*market risk premium Stock Expected rweights A 5.89% 20% 0.0118 B 7.74% 20% 0.0155 C 9.86% 20% 0.0197 D 8.18% 20% 0.0164 E 10.08% 20% 0.0202 8.35% Expected r just the return on the market. sk premium is already subtracted. the stock, using the CAPM is the beta of this portfolio. k premium and risk free rate as above. return of the portfolio...
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This note was uploaded on 06/07/2011 for the course FIN 2030 taught by Professor Baker during the Spring '11 term at Southeaster Oklahoma State University.
 Spring '11
 Baker
 Capital Asset Pricing Model

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