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1. If a stock has a market beta less than 1, the expected return will be...

1. If a stock has a market beta less than 1, the expected return will be less than expected return of market portfolio. True or False?

2. ABC, Inc., has a beta of 1.99. The risk-free rate is 3.45% and the market risk premium is 5.74%. What is the required rate of return on ABC's stock? Note: Convert your answer to percentage and round off to two decimal points.

3. Semi-strong-form efficient markets are not weak-form efficient. True or False?

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Answer #1

1. True. If market beta less than 1 then the expected return of portfolio is less than 1 .
As per Capm =Risk free rate+beta*Market Risk Premium So lower the beta lower is the expected return of market portfolio.

2. As per CAPM, required rate of return on ABC's stock =Risk free Rate+Beta*Market Risk Premium =3.45%+1.99*5.74%=14.87%

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