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What are the expected returns on a and b and c

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    Assignment ID: FG132964484

    The risk-free rate of return (rf ) is 2% and the expected market rate of return (rm) is 10%. The shares A, B and C all pay a dividend (D) of $6 a year. The betas for the three shares are βA = 0.75 and βB = 1.00 and βC = 1.25 . The three shares are trading at the same price (P) of $60. Requirements. Answer the following questions:

    Problem 1: What are the expected returns on A, B and C?

    Problem 2: What are the expected prices of A, B and C?

    Problem 3: What action would you recommend for A?

    Problem 4: What action would you recommend for B?

    Problem 5: What action would you recommend for C?

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