Question: The first questions answer is not 2, and it is not 1 We Do Bankruptcies is a law firm that specializes in providing advice to
We Do Bankruptcies is a law firm that specializes in providing advice to firms in financial distress. It prospers in recessions when other firms are struggling. Consequently, its beta is negative, -0.2. a. If the interest rate on Treasury bills is 5% and the expected return on the market portfolio is 15%, what is the expected return on the shares of the law firm according to the CAPM? (Enter your answer as a whole percent.) Answer is complete but not entirely correct. 10% return b. Suppose you invested 90% of your wealth in the market portfolio and the remainder of your wealth in the shares in the law firm. What would be the beta of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places) Answer is complete and correct. Beta 0.88
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
