Question: You consider investing in a start-up that develops a cool new technology. The start-up will either fail within a year or you quadruple your investment.
You consider investing in a start-up that develops a cool new technology. The start-up will either fail within a year or you quadruple your investment. The success probability is not known, but you can assume that the success/failure for this start-up is completely random and does not depend on how the economy or the stock market are performing. According to CAPM, what rate of return should you expect from investing in this start-up?
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
