Q. Stock A has a beta of 1.0 and very high unique risk. If the expected return on the market is 20%, then according to the CAPM the expected return on Stock A will be: (Solved)

1. the answer cannot be found without knowing Stock A’s correlation or covariance with the market.

2. more than 20% because of Stock A’s very high unique risk.

3. exactly 20%.

4. the answer cannot be found without knowing the risk-free rate of interest.

  • c. exactly 20%.
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