wk3 - Solutions Tutorial Week 3 Chapter 9 15 a 20 15 10 5 0...

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Solutions – Tutorial Week 3 Chapter 9 15. a. 0 5 10 15 20 00 . 511 . 52 Beta b. Market risk premium = r m – r f = 0.12 – 0.04 = 0.08 = 8.0% c. Use the security market line: r = r f + β (r m – r f ) r = 0.04 + [1.5 × (0.12 – 0.04)] = 0.16 = 16.0% d. For any investment, we can find the opportunity cost of capital using the security market line. With β = 0.8, the opportunity cost of
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wk3 - Solutions Tutorial Week 3 Chapter 9 15 a 20 15 10 5 0...

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