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Indicator for the expected future returns of the company

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a) Suppose a stock has a beta of one. Does that mean the stock has the same risk as the market portfolio?

b) Suppose you believe that a high Earnings/Price ratio for a company is a good indicator for the expected future returns of the company's stock. Is your belief consistent with the Capital Asset Pricing Model (CAPM)? Why or why not?

c) Suppose the TC Corporation's stock has a zero market beta. Does this mean that this security has no risk? Explain briefly.

Reference no: EM132345945

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