Explain rate of return if the market risk premium increased

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1. How do i calculate the portfolio beta coefficient of 4 stocks (A,B,C,D) with investments of 3, 2, 2.5 and 5 million respectively. The beta is 1.80, 1.20, 0.94 and 1.00 for the above stocks.

2. If the risk free rate is 10% and the return on the market portfolio is 18%?

a) What is the SML of the above

b) What is the rate of return should be earning on the portfolio if its risk-return pattern puts it right on the SML?

3. What is the required rate of return if inflation rate increased by 2%?

4. What is the required rate of return if the market risk premium increased to 20% because of the increase in investors' risk aversion assuming that the return on the risk-free asset remains the same as in question 2 above.

5. Using the calculation in question 4 above, what is the required rate of return if the investment is taxable and the tax rate is at 30%

Reference no: EM13214842

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