Question: (a) Total investment risk can be broken down into two types of risk. What are these two types of risk and which should NOT

(a) Total investment risk can be broken down into two types of

(a) Total investment risk can be broken down into two types of risk. What are these two types of risk and which should NOT affect expected return? (5 points) (b) A firm has a beta of 1.3. The expected market return is 12% and the risk-free rate is 2%. What should be the firm's equity cost of capital? (4 points, use the CAPM)

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