The following data have been developed for the Donovan Company, the manufacturer of an advanced line of

Question:

The following data have been developed for the Donovan Company, the manufacturer of an advanced line of adhesives:

The risk-free rate is 6%. Calculate the following:
(a) The expected market return.
(b) The variance of the market return.
(c) The expected return for the Donovan Company.
(d) The covariance of the return for the Donovan Company with the market return.
(e) Write the equation of the security market line.
(f) What is the required return for the Donovan Company? How does this compare with its expected return?

Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...