Question: use excel to show calculafions and formulas!! Beta Expected Return or Actual Return (E()) Jelly Roll's 1.75 19.0% Angels Unlimited 1.25 17.5% Video Viper 0.75
Beta Expected Return or Actual Return (E()) Jelly Roll's 1.75 19.0% Angels Unlimited 1.25 17.5% Video Viper 0.75 12.4% Shoe Lacers 0.40 6.9% aa) Calculate the required rate of return given risk free rate rf -4% and market return rm - 12%. b) Which of the investment is overpriced? Which have a positive Net Present Value when their cash flows discounted at the CAPM required rate of return? Explain your reasoning, c) If the inflation goes up by 2.5% and market risk premium remains the same, which security is overpriced/underpriced/correctly priced. Explain. d) If inflation remains the same but market risk premium goes up to 10%, which security overpriced/underpriced/correctly priced. Explain
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