# Question

Refer to Figure 7.2 and answer the following questions.

a. What return would you expect on a stock with a beta of 2.0?

b. What return would you expect on a stock with a beta of 0.66?

c. What determines the slope of the line in Figure 7.2?

a. What return would you expect on a stock with a beta of 2.0?

b. What return would you expect on a stock with a beta of 0.66?

c. What determines the slope of the line in Figure 7.2?

## Answer to relevant Questions

Wendi Deng recently inherited $1 million and has decided to invest it. Her portfolio consists of the following positions in several stocks. Calculate the portfolio weights to fill in the bottom row of the table. Calculate the portfolio weights based on the dollar investments in the table below. Interpret the negative sign on one investment. What is the size of the initial investment on which an investor’s rate of return ...The expected return on a particular stock is 14%. The stock’s beta is 1.5. What is the risk-free rate if the expected return on the market portfolio equals 10%? In what way is the NPV consistent with the principle of shareholder wealth maximization? What happens to the value of a firm if a positive-NPV project is accepted? If a negative-NPV project is accepted? Calculate the net present value (NPV) for the following 20-year projects. Comment on the acceptability of each. Assume that the firm has an opportunity cost of 14%. a. Initial cash outlay is $15,000; cash inflows are $13,000 ...Post your question

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