Question $41$

A project has two possible outcomes. The good outcome returns $$6,000$ next year and occurs

$94\%$ of the time. The bad outcome is total failure, returning $$0,$ the rest of the time. If the risk

free interest rate is $3\mathrm{.}4\%,$ the expected market return is $13\mathrm{.}7\%,$ and the project beta is $0\mathrm{.}9,$ what

is the price of the project today?

Question $42$

The stock of Arbor Pet Trees $($APT$)$ is priced based on the given systematic risk factors.

Estimated sensitivities to these risk factors are given by the betas of the regression

$R_{\text{A}\text{P}\text{T}}-R_{rf}={}_{\text{c}\text{r}\text{e}\text{d}\text{i}\text{t}}{R}_{\text{c}\text{r}\text{e}\text{d}\text{i}\text{t}}+{}_{\text{v}\text{a}\text{l}\text{u}\text{e}}{R}_{\text{v}\text{a}\text{l}\text{u}\text{e}}+a+$

What is the expected return on the stock of Arbor Pet Trees if the stock is fairly valued?