The time thesebetas were developed reasonable estimates for

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2A few years ago, the Value Line Investment survey reported the following market betas for the stocks of selected healthcare providers:

Company - Beta
Quorum Health Group 0.90
Beverly Enterprises 1.20
HealthSouthCorporation 1.45
United Healthcare 1.70

at the time thesebetas were developed, reasonable estimates for the risk-free rate,RF,and required rate of return on the market, R (Rm),were 6.5% and 13.5 % respectively.

(a) what are the required rates of return on the four stocks?
(b) why do their required rates of retuen differ?
(c) Suppose that a person is planning to invest in only one stock rather than a well-diversified stock portfolio.Are the required rates of return calculated above applicable to the investment?Explain your answer

Reference no: EM13600709

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