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Problem 6-14
Historical Returns: Expected and Required Rates of Return

You have observed the following returns over time:

Year Stock X Stock Y Market
2009 15% 13% 13%
2010 17 7 8
2011 -13 -6 -10
2012 2 3 3
2013 20 10 18

Assume that the risk-free rate is 3% and the market risk premium is 6%. Do not round intermediate calculations.

  1. What is the beta of Stock X? Round your answer to two decimal places.


    What is the beta of Stock Y? Round your answer to two decimal places.

  2. What is the required rate of return on Stock X? Round your answer to one decimal place.
    %

    What is the required rate of return on Stock Y? Round your answer to one decimal place.
    %
  3. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Round your answer to one decimal place.
    %

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Nelly Stracke
Nelly StrackeLv2
28 Sep 2019

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