This post addresses changes in a market portfolio.
Not what you're looking for?
31. Suppose the market portfolio is equally likely to increase by 30% or decrease by 10%.
A. Calculate the beta of a firm the goes up on average by 43% when the market goes up and goes down by 17% when the market foes down.
B. Calculate the bets of a firm that goes up on average by 18% when the market goes down and goes down by 22% when market goes up.
C. Calculate the beta of a firm that is expected to go up by 4% independently of the market.
35. Suppose the market risk premium is 6.5% and the risk-free interest rate is 5%. Calculate the cost of capital of investing in a project with a beta of 1.2.
Purchase this Solution
Solution Summary
The solution provides all calculations for both answers in the listed exercise. All calculations for beta and the cost of capital are given.
Questions:
Suppose the market portfolio is equally likely to increase by 30% or decrease by 10%. (A, B, &C are all included in the solution with calculations.)
2nd question:
Suppose the market risk premium is 6.5% and the risk-free interest rate is 5%. Calculate the cost of capital of investing in a project with a beta of 1.2.
Purchase this Solution
Free BrainMass Quizzes
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
Basics of corporate finance
These questions will test you on your knowledge of finance.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.