Suppose That the Risk-Free Rate Is 5% and the Market

question 39

Essay

Suppose that the risk-free rate is 5% and the market portfolio has an expected return of 13% with a volatility of 18%.Luther Industries has a volatility of 24% and a correlation with the market of .5.If you assume that the CAPM assumptions hold,then what is the expected return on Luther stock?

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Definitions:

Coping Ability

The capacity to deal effectively with stressors, challenges, or difficult situations.

Depressive Episodes

Periods characterized by feelings of intense sadness, loss of interest in activities, and other symptoms that affect daily functioning.

Psychosocial Distress

A state of emotional, social, and psychological turmoil or suffering that may affect an individual's ability to function effectively in daily life.

Genital Lesions

Sores or abnormalities that appear on the genital area, which can be a sign of infection, disease, or other health conditions.