Market risk premium on the market, Accounting Basics

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Market risk premium on the market

Problem:

Stock A has a beta of .4, and investors expect it to return 2%. Stock B has a beta of 1.6, and investors expect it to return 5%.

Required:

Question: Use the CAPM to find the expected rate of return and the market risk premium on the market.

Note: Please show basic calculation

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Accounting Basics: Market risk premium on the market

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Accounting Basics: Market risk premium on the market

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