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​​​​​ A stock's beta is 5, the market risk premium is 6%, and the risk-free rate...

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  1. A stock's beta is 5, the market risk premium is 6%, and the risk-free rate is 2%. According to the CAPM, what discount rate should you use when valuing the stock?
  1. A stock's beta is 1.5, the expected market return is 6%, and the risk-free rate is 2%. According to the CAPM, what discount rate should you use when valuing the stock?
  1. You have 2 assets to choose from when forming a portfolio: the market portfolio and a risk-free asset. The expected returns for these assets are .12 and .04, respectively. Suppose also that you have $40,000 to invest.
    1. If you want a portfolio with a beta of .80, how much money will you put in each asset? (For the quiz, enter the amount of money invested in the market.)
  1. If you want a portfolio with expected return of .10, how much money will you put in each asset? (For the quiz, enter the amount of money invested in the market.)

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jeff jeffy answered 1 year ago
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