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11) What is the expected return on a stock with a beta of 1.09, a market risk premium of 8%, and a risk-free rate of 4%?
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Answer #1

Expected Return = Risk free rate + Beta * Market Risk Premium

   = 0.04 + 1.09 * 0.08

= 0.04 + 0.0872

Expected Return = 0.1272 or 12.72%

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