impact on required rate of return of the Google's investment projects as per CAPM if the standard deviation of the market index portfolio increases by 50%. Introduction: Required return of the project is given by: Required return = Risk free rate + Beta of the project* Market risk premium

Question

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Answer 1

Question

Chapter 7, Problem 1PS

Summary Introduction

To determine:

impact on required rate of return of the Google's investment projects as per CAPM if the standard deviation of the market index portfolio increases by 50%.

Introduction:

Required return of the project is given by:

Required return = Risk free rate + Beta of the project* Market risk premium

Expert Solution & Answer

Explanation of Solution

Beta of the project = Covariance between the return of the project and market index portfolio/ Variance of the market index portfolio

Hence, an increase in the standard deviation of the portfolio is 50% will increase the Beta of the Google's investment project and its required rate of return.

Conclusion

Thus if the standard deviation of the market index portfolio increases by 50% then as per CAPM the required rate of return on Google's investment project will also rises.

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Answer 2

Question

Chapter 7, Problem 1PS

Summary Introduction

To determine:

impact on required rate of return of the Google's investment projects as per CAPM if the standard deviation of the market index portfolio increases by 50%.

Introduction:

Required return of the project is given by:

Required return = Risk free rate + Beta of the project* Market risk premium

Expert Solution & Answer

Explanation of Solution

Beta of the project = Covariance between the return of the project and market index portfolio/ Variance of the market index portfolio

Hence, an increase in the standard deviation of the portfolio is 50% will increase the Beta of the Google's investment project and its required rate of return.

Conclusion

Thus if the standard deviation of the market index portfolio increases by 50% then as per CAPM the required rate of return on Google's investment project will also rises.

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Answer 3

Question

Chapter 7, Problem 1PS

Summary Introduction

To determine:

impact on required rate of return of the Google's investment projects as per CAPM if the standard deviation of the market index portfolio increases by 50%.

Introduction:

Required return of the project is given by:

Required return = Risk free rate + Beta of the project* Market risk premium

Expert Solution & Answer

Explanation of Solution

Beta of the project = Covariance between the return of the project and market index portfolio/ Variance of the market index portfolio

Hence, an increase in the standard deviation of the portfolio is 50% will increase the Beta of the Google's investment project and its required rate of return.

Conclusion

Thus if the standard deviation of the market index portfolio increases by 50% then as per CAPM the required rate of return on Google's investment project will also rises.

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Answer 4

Question

Chapter 7, Problem 1PS

Summary Introduction

To determine:

impact on required rate of return of the Google's investment projects as per CAPM if the standard deviation of the market index portfolio increases by 50%.

Introduction:

Required return of the project is given by:

Required return = Risk free rate + Beta of the project* Market risk premium

Expert Solution & Answer

Explanation of Solution

Beta of the project = Covariance between the return of the project and market index portfolio/ Variance of the market index portfolio

Hence, an increase in the standard deviation of the portfolio is 50% will increase the Beta of the Google's investment project and its required rate of return.

Conclusion

Thus if the standard deviation of the market index portfolio increases by 50% then as per CAPM the required rate of return on Google's investment project will also rises.

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Answer 5

Chapter 7, Problem 1PS

Summary Introduction

To determine:

impact on required rate of return of the Google's investment projects as per CAPM if the standard deviation of the market index portfolio increases by 50%.

Introduction:

Required return of the project is given by:

Required return = Risk free rate + Beta of the project* Market risk premium

Expert Solution & Answer

Explanation of Solution

Beta of the project = Covariance between the return of the project and market index portfolio/ Variance of the market index portfolio

Hence, an increase in the standard deviation of the portfolio is 50% will increase the Beta of the Google's investment project and its required rate of return.

Conclusion

Thus if the standard deviation of the market index portfolio increases by 50% then as per CAPM the required rate of return on Google's investment project will also rises.

Answer 6

Chapter 7, Problem 1PS

Summary Introduction

To determine:

impact on required rate of return of the Google's investment projects as per CAPM if the standard deviation of the market index portfolio increases by 50%.

Introduction:

Required return of the project is given by:

Required return = Risk free rate + Beta of the project* Market risk premium

Expert Solution & Answer

Explanation of Solution

Beta of the project = Covariance between the return of the project and market index portfolio/ Variance of the market index portfolio

Hence, an increase in the standard deviation of the portfolio is 50% will increase the Beta of the Google's investment project and its required rate of return.

Conclusion

Thus if the standard deviation of the market index portfolio increases by 50% then as per CAPM the required rate of return on Google's investment project will also rises.

Answer 7

Chapter 7, Problem 1PS

Summary Introduction

To determine:

impact on required rate of return of the Google's investment projects as per CAPM if the standard deviation of the market index portfolio increases by 50%.

Introduction:

Required return of the project is given by:

Required return = Risk free rate + Beta of the project* Market risk premium

Answer 8

Expert Solution & Answer

Explanation of Solution

Beta of the project = Covariance between the return of the project and market index portfolio/ Variance of the market index portfolio

Hence, an increase in the standard deviation of the portfolio is 50% will increase the Beta of the Google's investment project and its required rate of return.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Conclusion

Thus if the standard deviation of the market index portfolio increases by 50% then as per CAPM the required rate of return on Google's investment project will also rises.

Answer 12

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impact on required rate of return of the Google's investment projects as per CAPM if the standard deviation of the market index portfolio increases by 50%. Introduction: Required return of the project is given by: Required return = Risk free rate + Beta of the project* Market risk premium

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