a) The risk premium on the market portfolio is estimated at 8 % with a standard deviation of 22 %. What is the risk premium on a portfolio invested 25 % in AELZ with a beta of 1.15 and 75 % in BAT with a beta of 1.25? (b) The return on the market is expected to be 14 %, a stock has a beta of 12, and the T-bill rate is 6 %. What expected rate of return would the SML predict? (c) A company is considering a new water bottling plant. Business plan forecasts an internal rate of return of 14 % on the investment. The beta of similar projects is 1.3. the risk free rate is 4 % and the market risk premium is estimated at 8 %. What is the hurdle for the project? What does this mean for the project: should it or should it not be undertaken?
(a) The risk premium on the market portfolio is estimated at 8 % with a standard deviation of 22 %. What is the risk premium on a portfolio invested 25 % in AELZ with a beta of 1.15 and 75 % in BAT with a beta of 1.25?
(b) The return on the market is expected to be 14 %, a stock has a beta of 12, and the T-bill rate is 6 %. What expected
(c) A company is considering a new water bottling plant. Business plan
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