Evaluate the firms required rate of return

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Reference no: EM13205239

1.Given the following information, compute the standard deviation for Investment A:

Payoff	Probability
20%	0.5
10%	0.4
-10%	0.1

2.Based on the information given below, which of the investments would be considered best based on its risk and return relationship? Assume all investors are risk-averse and the investments will be held in isolation, not in a portfolio.

	D	E	F
Expected return,	10.0%	18.0%	18.0%
Standard deviation,	7.0%	12.0%	20.0%

3.Consider the following information, and then calculate the required rate of return for the Scientific Investment Fund. The total investment in the fund is $2 million. The market required rate of return is 15 percent, and the risk-free rate is 7 percent.

Stock	Investment	Beta
A	$200,000	1.50
B	300,000	-0.50
C	500,000	1.25
D	1,000,000	0.75

4.Moerdyk Company's stock has a beta of 1.40, the risk-free rate is4.25%, and the market risk premium is5.50%.What is the firm's required rate of return?

5.Explain briefly: total risk, diversifiable risk and market risk and why are these concepts important?

Reference no: EM13205239

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