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Unformatted text preview: 12.5%. Answer: If the systematic risk were comparable to that of the market, the discount rate would be 12.5%, the expected market return. Or using CAPM: NOTE: the propertys beta is 1 because its market risk is the same as the market portfolios. The property would be worth: $50,000/0.125 = $400,000 12.5% 5%)-(12.5% * 1 5% ) r-(r r r f m f = + = + =...
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This note was uploaded on 11/18/2011 for the course FIN 351 taught by Professor Li during the Fall '09 term at S.F. State.
- Fall '09