a. Estimate the beta of an unlevered firm in the commuter airline business based on Jaxair's market-determined beta. Do not round intermediate calculations. Round your answer to three decimal places. 1.36 b. Now assume that rd = TRF = 9% and that the market risk premium RPM = 4%. Find the required rate of return on equity for an unlevered. commuter airline. Do not round intermediate calculations. Round your answer to three decimal places. % c. Air Tampa is considering three capital structures: (1) $1 million debt, (2) $2 million debt, and (3) $3 million debt. Estimate Air Tampa's rs for these debt levels. Do not round intermediate calculations. Round your answers to two decimal places. 1. Air Tampa's rs for $1 million debt: 2. Air Tampa's rs for $2 million debt: 3. Air Tampa's rs for $3 million debt: % % %

6) An investor holds a portfolio of stocks and is considering investing in the DBB Company. The firm's prospects look neutral, and you estimate the following probability distribution of possible returns: Conditions Recession P Returns on DBB Returns on DVI 0.12 -33% -12% Below Average 0.15 -18% 7% Average 0.46 12% 11% Above Average 0.15 25% 23% Boom 0.12 37% 25% a) How much is the expected return for DBB? b) How much is the coefficient of variation for DBB? c) Now let's say you want to add another asset, DVI, to your portfolio. You sell 35% of DBB to purchase DVI. How much is your expected return for this portfolio? d) How much is the coefficient of variation for the new portfolio?

Suppose the market portfolio has an expected return of 10% and a volatility of 20%, while Microsoft’s stock has a volatility of 30%. Microsoft’s equity cost of capital is 10%. Based on this information, which statement is most likely to be correct? (assume that all assumptions of CAPM are satisfied) Group of answer choices Microsoft’s beta is lower than 1. There is not enough information to determine Microsoft’s beta. Microsoft’s beta is 1. Microsoft’s beta is higher than 1.

Dog

Interpreting beta A firm wishes to assess the impact of changes in the market return on an asset that has a beta of 0.8. a. If the market return increased by 23%, what impact would this change be expected to have on the asset's return? b. If the market return decreased by 6%, what impact would this change be expected to have on the asset's return? c. If the market return did not change, what impact, if any, would be expected on the asset's return? d. Would this asset be considered more or less risky than the market? a. If the market return increased by 23%, the impact on the asset's return is %. (Round to one decimal place. Enter a negative percentage number if the asset return decreases.)