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:

Electrical Energy

Energy derived from electric potential or kinetic energy, which is commonly used for power generation and distribution in households and industries.

Wavy Lines

Lines that exhibit a series of smooth, curving shapes, often used in art and design to suggest movement or variability.

Temporal Lobes

The temporal lobes are regions of the brain located on each side of the brain, responsible for processing auditory information and encoding memory.

Neurons

are specialized cells in the nervous system that transmit information to other nerve cells, muscle, or gland cells.