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1. Calculate the required rate of return for Mercury Inc., assuming that the real risk-free rate is equal to 4% and the market risk premium (note that is not the same as the market return) is 6%. Mercury has a beta of 1.5, and its realized rate of return has averaged 15% over the last 5 years.
13%
16%
17%
18%
6%
2. Analysts have calculated asset y to have a beta of 1.2. The risk-free rate of return is 4 percent, while the return on the market portfolio of assets is 10 percent. The asset's market risk premium
11.2 percent.
6.0 percent.
12.8 percent.
7.2 percent.
Which of the following statements about capital budgeting cash flows is false?
An analyst has modeled the stock of a company using the Fama-French three-factor model. The risk-free rate is 5%, the market return is 10%, the return on the SMB portfolio (rSMB) is 3.2%, and the return on the HML portfolio (rHML) is 4.8%. If ai = 0,..
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