Solution-Calculate expected rates of return on the stocks

Calculate expected rates of return on the stocks

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Calculate expected rates of return on the following stocks. The risk-free interest rate is 7%. "a. A stock whose return is uncorrelated with all three factors. b. A stock with average exposure to each factor (i.e., with b = 1 for each). c. A pure-play energy stock with high exposure to the energy factor (b = 2) but zero exposure to the other two factors. d. An aluminum company stock with average sensitivity to changes in interest rates and GNP, but negative exposure of b = - 1.5 to the energy factor. (The aluminum company is energy-intensive and suffers when energy prices rise.) "

Reference no: EM13274847

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Calculate expected rates of return on the stocks

Reference no: EM13274847

Reference no: EM13274847

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