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, -0.4. 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.) Expected return (15) % 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.)
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, -0.4. 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.) Expected return (15) % 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.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text: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, -0.4.
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.)
Expected return
(15) %
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.)
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