Question: Integrative Risk, return, and CAPM Wolff Enterprises must consider one investment project using the capital asset pricing model (CAPM). Relevant information is presented in the

IntegrativeRisk, return, and CAPMWolff Enterprises must consider one investment project using the capital asset pricing model (CAPM). Relevant information is presented in the following table.

Item

Rate of return

Beta, b

Risk-free asset

10%

0.00

Market portfolio

14%

1.00

Project

0.67

a.Calculate the required rate of return for the project, given its level of nondiversifiable risk.

b.Calculate the risk premium for the project, given its level of nondiverisifiable risk.

IntegrativeRisk, return, and CAPMWolff Enterprises must consider one investment project using the capital asset pricing model (CAPM). Relevant information is presented in the following table.

Item

Rate of return

Beta, b

Risk-free asset

10%

0.00

Market portfolio

14%

1.00

Project

0.67

a.Calculate the required rate of return for the project, given its level of nondiversifiable risk.

b.Calculate the risk premium for the project, given its level of nondiverisifiable risk.

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