K&P Legal, a law/advisory firm, focuses on advising businesses in financial trouble. The firm has a...

Transcribed Image Text:

K&P Legal, a law/advisory firm, focuses on advising businesses in financial trouble. The firm has a negative beta of -0.2 as it grows during downturns when the market is suffering. a. Considering Capital Asset Pricing Model (CAPM), calculate the expected return on K&P Legal's shares assuming that the risk-free rate is 4% and the expected return on the market portfolio is 14% (Type your solution as a whole percent.) Expected return 4 % b. Suppose that Kerem constructs a portfolio consisting of the market portfolio and K&P shares. 70% of his portfolio is invested in the market portfolio and the rest in K&P Legal shares. Calculate the beta of Kerem's portfolio. (Intermediate computations should not be rounded. Type your responses rounded to two decimal places.) Beta K&P Legal, a law/advisory firm, focuses on advising businesses in financial trouble. The firm has a negative beta of -0.2 as it grows during downturns when the market is suffering. a. Considering Capital Asset Pricing Model (CAPM), calculate the expected return on K&P Legal's shares assuming that the risk-free rate is 4% and the expected return on the market portfolio is 14% (Type your solution as a whole percent.) Expected return 4 % b. Suppose that Kerem constructs a portfolio consisting of the market portfolio and K&P shares. 70% of his portfolio is invested in the market portfolio and the rest in K&P Legal shares. Calculate the beta of Kerem's portfolio. (Intermediate computations should not be rounded. Type your responses rounded to two decimal places.) Beta

Answer rating: 100% (QA)

Here Beta of K P Legal firm 81 05 Part a Risk free rate Rf 7 Expected return ... View the full answer