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Calculate equilibrium expected returns for stocks

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Reference no: EM133164178

Question - Expected return on the market portfolio is 10%, the risk-free rate is 6%. Beta of stock A and B are 1.20 and 0.90 respectively.

(a) Specify the equations for Security Market Line (SML).

(b) Calculate equilibrium expected returns for stocks A and B.

(c) Why A and B have different equilibrium expected rates of return?

Reference no: EM133164178

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