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What is united healthcare corporate beta

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Suppose that you are an investor and you currently hold a well-diversified portfolio of stocks. Suppose you are considering in investing in United Healthcare. United Healthcare's stand-alone risk is s = 0.05 and the correlation coefficient between United and the well-diversified portfolio is r=0.5. The well-diversified portfolio's average rate of return is 8% at it stand-alone risk is s = 0.02 (with r=1). The riskless rate of return is 2%.

Problem a. What is United Healthcare's corporate beta? Interpret your result.

Problem b. According to the CAPM model, what is the required rate of return for United Healthcare? Interpret your result.

Reference no: EM132878624

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