If the US T-Bond rate is 5.00% (rRF = 5%), the required return on the...
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If the US T-Bond rate is 5.00% (rRF = 5%), the required return on the stock market is 11% (rM = 11%). What is the required rate of return for Stock REB if the company's beta is 0.5 (bi = 0.5),?
a.) Use the SML equation to calculate rREB (the required return for REB.
SML: ri = rRF + (rM rRF)bi
b.) Identify rREB it on the graph below.
c.) Calculate the Market Risk Premium (RPM).
d.) What is beta for the market portfolio?
e.) Is REB more or less risky than the stock market?
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