1. A firm has a beta of 1.50 and the rate on government bonds is 6%. The expected return on the market portfolio is 15%. What is the cost of equity?

A company's fund manager has a P20,000,000 portfolio with a beta of 0.75. The risk free rate is 4.50% and the market risk premium is 5.00%. The manager expects to receive an additional P30,000,000, which she plans to invest in several stocks. After investing the additional funds, she wants the fund's required return to be 9.50%.

2. What is the required rate of return on the initial P20M investment?

3. What is the rate of return of all risky and risk-free securities?

4. To achieve the fund manager's required return target, the funds should be invested in an investment with a beta of ____

5. Judge the overall riskiness of the P50M portfolio.

a. Aggressive

b. Neutral

c. Conservative