Question

Q.1 A stock with a beta of 1.3 has an expected rate of return of 16%. If the

market return this year turns out to be 8 percentage points below expectations, what is your best guess as to the rate of return on the stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

Q. 2 The risk-free rate is 5% and the expected rate of return on the market portfolio is 10%.

a. Calculate the required rate of return on a security with a beta of 1.23. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

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