Assume that the risk-free rate is 6 and the market risk


You have observed the following returns over time:

Year                 Stock X               Stock Y           Market

2012                  14%                    13%                 12%

2013                  19                         7                      10

2014                 −16                       −5                   −12

2015                   3                           1                      1

2016                  20                         11                    15

Assume that the risk-free rate is 6% and the market risk premium is 5%. What are the betas of Stocks X and Y? What are the required rates of return on Stocks X and Y?

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Financial Management: Assume that the risk-free rate is 6 and the market risk
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