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What is the expected return on the shares of law firm

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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 7% and the expected return on the market portfolio is 17%, what is the expected return on the shares of the law firm according to the CAPM?

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?

Reference no: EM132807333

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