1. A share of stock with a beta of 0.78 now sells for $53. Investors expect the stock to pay a year-end dividend of $5. The T-bill rate is 5%, and the market risk premium is 8%. If the stock is perceived to be fairly priced today, what must be investors' expectation of the price of the stock at the end of the year?(Do not round intermediate calculations. Round your answer to 2 decimal places.)

2. A share of stock with a beta of 0.78 now sells for $53. Investors expect the stock to pay a year-end dividend of $5. The T-bill rate is 5%, and the market risk premium is 8%. If the stock is perceived to be fairly priced today, what must be investors' expectation of the price of the stock at the end of the year?(Do not round intermediate calculations. Round your answer to 2 decimal places.)

b.How does expected return vary with beta?(Do not round intermediate calculations.)

14. The Treasury bill rate is 6%, and the expected return on the market portfolio is 10%. According to the capital asset pricing model:

a.What is the risk premium on the market?

b.What is the required return on an investment with a beta of 1.5?(Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

c.If an investment with a beta of 0.7 offers an expected return of 8.5%, does it have a positive or negative NPV?

d.If the market expects a return of 10.8% from stock X, what is its beta?(Do not round intermediate calculations. Round your answer to 2 decimal places.)

15. A project under consideration has an internal rate of return of 12% and a beta of 0.8. The risk-free rate is 7%, and the expected rate of return on the market portfolio is 12%.

a.What is the required rate of return on the project?(Do not round intermediate calculations. Enter your answer as a whole percent.)

b.Should the project be accepted?

c.What is the required rate of return on the project if its beta is 1.80?(Do not round intermediate calculations. Enter your answer as a whole percent.)

d.If project's beta is 1.80, should the project be accepted?

4. The Treasury bill rate is 4% and the market risk premium is 8%.

Project Beta Internal Rate of Return, %

P 1.10 16

Q 0.00 12

R 2.00 20

S 0.50 13

T 1.60 22

a.What are the project costs of capital for new ventures with betas of 0.85 and 1.78?(Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

b.Which of the capital investments shown above have positive (non-zero) NPV's?(You may select more than one answer.

5. You are considering the purchase of real estate that will provide perpetual income that should average $56,000 per year. How much will you pay for the property if you believe its market risk is the same as the market portfolio's? The T-bill rate is 4%, and the expected market return is 14.0%.