Find the beta for an asset with a required return

Reference no: EM132671972

Questions -

Q1) Suppose you are offered two investments with the following expected cash flows:

Economic Scenario	Probability of Economic Scenario	Outcome for Investment 1	Outcome for Investment 2
Boom	20%	$1,000	$1,200
Normal	50%	750	750
Bust	30%	250	117

a. Calculate the expected value of each investment.

b. Calculate the standard deviation for each investment's possible outcomes.

c. Which investment is riskier? Explain.

Q2) Use the basic equation for the capital asset pricing model (CAPM) to work each of the following situations.

a. Find the required return for an asset with a beta of 2.2 when the risk-free rate and market return are 5% and 32%, respectively.

b. Find the risk-free rate for a firm with a required return of 23.75% and a beta of 1.25 when the market return is 20%.

c. Find the market return for an asset with a required return of 18% and a beta of 1.2 when the risk-free rate is 8%.

d. Find the beta for an asset with a required return of 15% when the risk-free rate and market return are 3% and 15%, respectively.

Reference no: EM132671972

Questions Cloud

What are some examples of psychological test : What are some examples of psychological test that are both ratio scale and criterion-reference?

Definitions of object serialization and deserialization : Create a JSON object with five elements. Explain the definitions of object serialization and deserialization.

What should get fit now record in balance sheet : Get Fit Now collects the $540 in advance and will provide the training later. After four training sessions, what should Get Fit Now record in its Balance Sheet?

What are susan major obstacles : What are Susan's major obstacles? Are these challenges typical of those faced by individuals with autism? Explain.

Find the beta for an asset with a required return : Find the beta for an asset with a required return of 15% when the risk-free rate and market return are 3% and 15%, respectively

What role you think the hr department at cm tech can have : In our Week 2 reading we learned several reasons that performance management is receiving such focus now. We also read about Human Resources and their role in.

Which should be recorded as a revenue or expense : Temple Manufacturing uses accrual accounting. Which should be recorded as a revenue or expense for the month of February?

List of characteristics of tbis : What characteristics come to your mind when you think of someone with TBI? Can you list a couple?

How does depression in older adults differ : How does depression in older adults differ from depression in younger adults? How is it diagnosed and treated?

User Account

All Pages