# Question

I am buying a firm with an expected cash flow of $ 1,000 but am unsure of its risk. If I think the beta of the firm is 0.5, when in fact the beta is really 1, how much more will I offer for the firm than it is truly worth?

Assume that the risk- free rate of interest is 6 percent and the expected rate of return on the market is 16 percent.

Assume that the risk- free rate of interest is 6 percent and the expected rate of return on the market is 16 percent.

## Answer to relevant Questions

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