Expected rate of return on the market

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Assume that the risk-free rate of interest is 6% and the expected rate of return on the market is 16%. I am buying a firm with an expected perpetual cash flow of $1,000 but am unsure of its risk. If I think the beta of the firm is .5, when in fact the beta is really 1, how much more (in dollars) will I offer for the firm than it is truly worth? Round to the nearest ten dollars.

Reference no: EM133126601

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