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the risk premium of the market has been estimated at 9% the risk free rate is 3.25% Scenario 1: FG stocks beta is estimated at 1.45 what is the expected rate of return on FG stock? Scenario 2: the beta was incorrectly computed; it was re-estimated at .95 what is the expected rate of return on FG stock in Scenario 2? what can be said about FG stock in Scenario 2 vs. Scenario 1? PLEASE DESCRIBE IN DETAIL

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Home nert Page Layout Formulas Data Review View dd-Ins Cut Σ AutoSum ー E ゴWrap Text aCopy в 1 프 . Ej-., Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 Conditional Format eCell Insert Delete Format Paste Sort &Find & Format Painter Formatting as Table Styles2 Clear Clipboard Font Alignment Number Cells Edting NC81 MS MT ke Rf+ beta(Rm-Rf) ke = 3.25% + 1.45*(996-3.25%) MR MU MW MX MY Mz NA NB NC ND NE NF NG 68 69 70 71 72 73 74 75 76 11.59% ke -Rf+beta(Rm-Rf) ke-3.25% + 0.95*(996-3.25%) 8.71% HIGHER THE BETA, HIGHER THE RISK, HIGHER THE RETURN BETA SHOWS RELATIONSHIP NETWEEN STOCK & MARKET 78 79 80 81 82 83 84 85 86 4 KE CAPM UTILITY, SHARPE, beta bond IN SCENARIO 1, BETA IS 1.45 IT IS GREATER THAN 1, SO STOCK IS MORE VOLATILE THAN MARKET IF MARKET CHANGES BY 1%, STOCK WILL CHANGE BY 1.45% IN SCENARIO 2, BETA IS 0.95 IT IS LESS THAN 1, STOCK IS LESS VOLATILE THAN MARKET IF MARKET CHANGES BY 1%, STOCK WILL CHANGE BY 0.95% future INDEX INTL CAP BUDLEASING PV, FV, ANNUITYDIR cleanYIELD bond tru WACC RESI ex d 福 130% 05:51

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