A group of investors is considering starting a firm. The joint distribution of the internal rate...
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A group of investors is considering starting a firm. The joint distribution of the internal rate of return (IRR) for starting the firm R, and the market portfolio- retum R, is assumed to be as follows: R₂ 20% 10% R.5% 30% 1/8 1/16 1/16 15% 1/16 1/4 0 0% 1/8 1/16 1/4 a. What is the expected return for the market and for the firm? b. What is the beta for the firm? c. Should the investor group start assuming that the distribution above is correct and the risk-free interest rate is 5%? A group of investors is considering starting a firm. The joint distribution of the internal rate of return (IRR) for starting the firm R, and the market portfolio- retum R, is assumed to be as follows: R₂ 20% 10% R.5% 30% 1/8 1/16 1/16 15% 1/16 1/4 0 0% 1/8 1/16 1/4 a. What is the expected return for the market and for the firm? b. What is the beta for the firm? c. Should the investor group start assuming that the distribution above is correct and the risk-free interest rate is 5%?
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a What is the expected return for the market and for the firm ANSW ER The expected r... View the full answer
Related Book For
Financial Accounting an introduction to concepts, methods and uses
ISBN: 978-0324789003
13th Edition
Authors: Clyde P. Stickney, Roman L. Weil, Katherine Schipper, Jennifer Francis
Posted Date:
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