In-Class Exercise 5
Find the WACC of William Tell Computers. The total book value of the firm's equity is
$10M. Book value per share is $20. The stock sells for a price of $30 per share. The cost
of equity is 15%. The firm's bonds have a face value of $5M

Risk and Return
Asset Pricing
Models
CAPM
The CAPM
The key finding in MPT is that risk (as
measured by variance or standard deviation of
returns) is reduced when individuals hold
portfolios of assets.
The market risk of an individual asset is the
degree t

Sabanci University, Faculty of Arts and Social Sciences
Spring 2015
HOMEWORK 4 (ECON 202: MACROECONOMICS)
Instructor. Hakki Yazici
This homework is due on Tuesday, May 26st, at the beginning of the final exam.
Question 1.
(15 points) Explain why an econom

Sabanci University, Faculty of Arts and Social Sciences
Spring 2015
HOMEWORK 3 (ECON 202: MACROECONOMICS)
Instructor. Hakki Yazici
The homework should be turned in at the beginning of class on Thursday, May 7th.
Question 1. (33 points) Question 4 on page

Solution to In-Class Exercise 3
Suppose the expected returns and standard deviation of stocks A and B are E(Ra) = 0.13,
E(Rb) = 0.19, a = 0.38, b = 0.62 respectively.
a) Calculate the expected return and standard deviation for a portfolio that is
composed

Solution to In-Class Exercise 4
Suppose you observe the following situation:
Security
X
Y
Beta
1.5
0.8
Expected Return
0.16
0.12
Assume these securities are correctly priced.
a) E(Rm)? Rf?
b) There is a security Z with a beta 1.8. What should be the expec