PROBLEMS Value at risk (LO 11 Consider a portfolio comprising a $3 million investment in Outlook Publishing and a $5 million investment in Russell Computing. Assume that the standard deviations of the returns for shares in these companies are 0.4 and 0.25 per cent per annum respectively. Assume also that the correlation between the returns on the shores in these companies is 0.7. Assuming a 1 per cent chance of abnormally bad market conditions, calculate the value at risk of this portfolio. State any assumptions that you make in your calculations, Calculating cost of capital (LO 1) Bay of Islands Dairies Ltd has an interest rate on its debt of 6 per cent per annum. The systematic risk ali equity is 1.2 and the effective company tax rate is 0.12. Forty per cent of its funding is provided by debt while 60 per cent is provided by equity. The risk-free interest rate is 5 per cent per annum. In calculating cost of capital, Bay of Islands has obtained two expert opinions as to the market risk premium (including franking premium). One expert suggests that the market risk premium is per cent per annum, while the suggests that the market risk premium is 5 per cent per annum. What is Bay of Islands' cost of capital based these experts' opinions of the market risk premium