Polycorp existing assets

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1. Polycorp's existing assets (projects) have a average beta of 1.2. The market risk premium is 5% and the risk free rate is 3%. What is the risk adjusted rate of return RADR required for these assets (the cost of capital of the existing assets)? provide your answer as a percentage but do not enter the % sign. An answer of 10.456% should be entered as 10.46.

2. The annual nominal rate is jm = 0.13pa. What is the effective annual rate as a percentage to two decimal places? The number of compounding periods is 8. Enter your answer as a decimal eg 17.42% = .1742 to four decimal places. Accuracy of one basis point. Tip: use excel to get the required accuracy.

3. Polycorp is considering a new project. The project has beta (β) that is twice that of the firm's existing assets (projects). Polycorp's existing assets have a required return (cost of capital) of 10%, the market risk premium is 5% and the risk free rate is 4%. Calculate the beta for the new project. Provide your answer accurate to two decimal places.

Reference no: EM131660757

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