Consider the following two assets: Asset Expected Return Beta X 5.8% 0.8 Y 14.2% 1.8 If the risk free rate is 1%, what will happen to the prices of assets X and Y in an efficient market

Respuesta :

The inefficient market risk premium of both stocks must be equal. Since information about market return or market risk premium is not provided, so we cannot estimate the relationship between stock X and Stock Y.

So, there is no way of knowing what will happen - efficient markets have no implications for the relationship between Asset X and Asset Y.

The Expected return is the amount of money an investor expects to make on an investment given the funding's ancient return or possibly charges of going back underneath various eventualities.

The marketplace risk top rate may be calculated via subtracting the hazard-unfastened fee from the expected fairness market go back, offering a quantitative degree of the more goes back demanded by market participants for the elevated chance. Once calculated, the fairness threat top class may be utilized in critical calculations consisting of CAPM.

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