29. CAPM. We Do Bankruptcies is a law firm that specializes in providing advice to firms in...
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29. CAPM. We Do Bankruptcies is a law firm that specializes in providing advice to firms in finan- cial distress. It prospers in recessions when other firms are struggling. Consequently, its beta is negative, -.2. (LO2)
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?
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?
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Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780073382302
6th Edition
Authors: Richard A Brealey, Stewart C Myers, Alan J Marcus
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