NOTE: I JUST NEED AN INTRODUCTION AND CONLCUSION ABOUT THIS THEME AND QUESTIONS BELOW.

NOTE: I JUST NEED AN INTRODUCTION AND CONLCUSION ABOUT THIS THEME AND QUESTIONS BELOW.

NOTE: I JUST NEED AN INTRODUCTION AND CONLCUSION ABOUT THIS THEME AND QUESTIONS BELOW.

1. The parents of a newborn girl decide to place $10,000 in a bank today with the aim of forming a fund to finance their education.

• a) If the interest rate earned on the deposit is 6 per cent per year, composed every 30 days, how much money will the girl have when she is 12 and starts secondary school?Suppose a year of 365 days.
• b) How much will you have in 17 years when you start college?

2. The parents of a newborn girl decide to place $10,000 in a bank today with the aim of forming a fund to finance their education.

• a) If the interest rate earned on the deposit is 6 per cent per year, composed every 30 days, how much money will the girl have when she is 12 and starts secondary school?Suppose a year of 365 days.
• b) How much will you have in 17 years when you start college?

1. Suppose the risk-free rate is 5% and the expected return on the market portfolio is 15%. If a joint action has a Beta of 0.60, what is its expected return under the CAPM? If another common action has an expected yield of 15%, what should be its beta?

4. The risk-free interest rate is 5% and the expected return on the market portfolio is 12%.Assuming the CAPM assumptions are met:

• a) What is the market risk premium?
• b) What is the required return on an investment with a beta of 1.5?
• c) If an action has a Beta=1 and offers an expected yield of 10%, is it overvalued?
• d) Draw a chart showing how the expected performance varies with Beta.

5. A U.S. Treasury bond offers a 5% return. A common share has a beta of 0.70 and an expected return of 12%.

• a) What is the expected return on a portfolio composed of equal investments in these two assets?
• b) If a portfolio composed of these two assets has an expected return of 15 per cent, what is its beta?
• c) If a portfolio of these two assets has a beta of 1.20, what are the weighting factors? How is the weight factor of the risk-free asset interpreted?

6. The company Caracol contemplates the possibility of issuing shares to finance an expansion project. Financial analysts at Caracol have determined that the project has the same risk as the market portfolio, as it has an expected return of 15% and the risk-free rate is 5%. The project yield is estimated at 20%. The project will continue unless:

• a) The company's beta is higher than 1.5.
• b) The company's beta is less than 1.5.
• c) Whatever the company's beta, because what matters is the project's beta

NOTE: I JUST NEED AN INTRODUCTION AND CONLCUSION ABOUT THIS THEME AND QUESTIONS BELOW.

NOTE: I JUST NEED AN INTRODUCTION AND CONLCUSION ABOUT THIS THEME AND QUESTIONS BELOW. NOTE: I JUST NEED AN INTRODUCTION AND CONLCUSION ABOUT THIS THEME AND QUESTIONS BELOW.