Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
14th Edition
ISBN: 9780133507690
Author: Lawrence J. Gitman, Chad J. Zutter
Publisher: PEARSON
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Chapter 8, Problem 8.21P

a)

Summary Introduction

To discuss:

Change in market returns on expected returns.

Introduction:

Beta is an indicator of the risk tha  measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

b)

Summary Introduction

To discuss:

Change in market returns on expected returns.

Introduction:

Beta is an indicator of the risk tha  measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

c)

Summary Introduction

To discuss:

Asset preference.

Introduction:

Beta is an indicator of the risk tha  measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

d)

Summary Introduction

To discuss:

Asset preference.

Introduction:

Beta is an indicator of the risk tha  measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.

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Based upon the information below calculate the Expected Return of the Asset (E)= ∑ Pr * R Worst Case      .25     13%  Most Likely      .50     15% Best Case        .25     17% 13.5 Select 14.25 as your answer 14.25 Select 15 as your answer 15 Select 15.5 as your answer 15.5
Use the following table to calculate the expected return from the asset. Return Probability 0.1      0.25     0.2      0.5     0.25      0.25       20.00% 18.75% 17.50% 15.00%
4. Explain what the Capital Asset Pricing Model (CAPM) is and calculate and explain the result of the CAPM based on the following data. a. Expected Return: 8% b. Risk-free rate: 4% c. Beta of the investment: 1.2 ER=Rf+B(ERm - Rf) where: ER = expected return of investment Rf risk-free rate B;= beta of the investment - (ERm - Rf) = market risk premium

Chapter 8 Solutions

Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)

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