The shares of the law firm according to the CAPM

Assignment Help Financial Management

Reference no: EM131860581

We Do Bankruptcies is a law firm that specializes in providing advice to firms in financial distress. It prospers in recessions when other firms are struggling. Consequently, its beta is negative, −0.3.

a. If the interest rate on Treasury bills is 4% and the expected return on the market portfolio is 14%, what is the expected return on the shares of the law firm according to the CAPM? (Enter your answer as a whole percent.)

b. Suppose you invested 70% of your wealth in the market portfolio and the remainder of your wealth in the shares in the law firm. What would be the beta of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Reference no: EM131860581

Questions Cloud

What is par value and current interest payment : what is the par value and current interest payment of the TIPS?

Each of the agents might make use of derivatives : Explain how each of the following agents might make use of derivatives.

Compute the ARR on the new equipment : Compute the ARR on the new equipment that Cobre Company is considering. How much did the company in Scenario c invest in the project?

Bonds for needed expansion projects : Chamberlain Co. wants to issue new 15-year bonds for some much-needed expansion projects.

The shares of the law firm according to the CAPM : what is the expected return on the shares of the law firm according to the CAPM?

Planning on retiring to jamaica : In fifteen years, you are planning on retiring to Jamaica. You have your eyes set on a house that currently costs $150,000.

Develop the aroma profile and report on it : Create your own Aroma Study Kit and develop the aroma profile and report on it. This will require several hours after you procure the ingredients.

What is value of the firm : If the tax rate is 35 percent, what is the value of the firm? What will the value be if the company borrows $102,000 and uses the proceeds to repurchase shares?

What is expected capital gains yield over the next year : If interest rates remain unchanged, what is the expected capital gains yield over the next year for bond P and bond D?

User Account

All Pages