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Problem: The risk-free rate is 7% and the expected rate of return on the market portfolio is 12%.
a. Calculate the required rate of return on a security with a beta of 1.96. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Required return ______________%
b. If the security is expected to return 15%, is it overpriced or underpriced?
Choose one of the following:
Discount rate in determining intrinsic values because he avoids risk, saying that his firm focused on companies with predictable and stable earnings.
Assume that par value of the bond is $1,000. Calculate annual coupon interest payments. Assume that par value of the bond is $1,000.
By successfully completing this assignment, you will demonstrate your proficiency in the following course competencies and assignment criteria:
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