FIN 300 Quiz 5 Risk and Return Solutions 2019.pdf - FIN 300 Quiz 5 Risk and Return Solutions 1 2 Terry Dactel is considering the purchase of an asset

FIN 300 Quiz 5 Risk and Return Solutions 2019.pdf - FIN 300...

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FIN 300 Quiz 5 Risk and Return Solutions 1 & 2. Terry Dactel is considering the purchase of an asset having the following cash flows: Ki Prob 20 .40 8 10 100 .40 40.00 10 .50 5 0 0 .50 0 -30 .10 -3 -40 1600 .10 160.00 Exp. value 10 200.00 std. dev. = 14.14 3. Polly Khan is trying to calculate the risk-free rate given the following information: The current market rate of interest is 8%. Investor’s have been requiring a 10% annual return on Builtrite’s stock which has a beta of 1.5. What is the current risk-free rate? CAPM = RF + b(KM – RF) 10 = X + 1.5(8 – X)

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