Your assignment for this week is to answer the following questions. Please be sure to show your work. There are six questions in this assignment, some with multiple sections. The assignment is worth 90 points and all questions are equally weighted.

1. What is beta? How it is used to calculate investors required rate of return?
2. Summarize the historical trade-off between risk and return.
3. How do you measure the risk of an asset?
4. Why is the T-bills return independent of the state of the economy? Do T-bills promise a completely risk-free return? Explain.
5. The preferred stock of Dragons Inc. pays a $3 dividend. What is the value of the stock if your required rate of return is 10%?
6. Mosser Corporation, Inc. paid a $4 dividend last year. At a constant growth rate of 6%, what is the value of common stock if the investors require a 10% rate of return?