Shrinking its balance sheet as part of policy normalization

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1. The Federal Reserve Board has started shrinking its balance sheet as a part of policy normalization. Between that and using interest rate tools such as IOER and ON RRP, what do you think investors are considering when forecasting rates?

2. ABC stock has a beta of 1.97, the risk-free rate is 8.3%, and the market risk premium is 9.92%. What is ABC's required rate of return under CAPM? (Show your answer as a decimal to three places, e.g., if the answer is 12.3% input 0.123) Please show work.

Reference no: EM132012054

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