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4. The following data have been developed for the FTLQ (Finally, the last question) Company: State 1 2 3 4 Probability 0.1 0.3 0.5 0.1
4. The following data have been developed for the FTLQ (Finally, the last question) Company: State 1 2 3 4 Probability 0.1 0.3 0.5 0.1 Market Return, Rm -0.15 0.05 0.15 0.20 Return for the Firm, Rk -0.30 0.00 0.2 0.5 The risk-free rate is 3%. Calculate the following. d) Cox (Rm, RFTLQ) e) Write an equation of the security market line (this will be an equation showing E(r) and beta relation). f) What is the required rate of return (from CAPM) for the FTLQ Company? How does this compare with its expected return (from part (C) above)? 4. The following data have been developed for the FTLQ (Finally, the last question) Company: State 1 2 3 4 Probability 0.1 0.3 0.5 0.1 Market Return, Rm -0.15 0.05 0.15 0.20 Return for the Firm, Rk -0.30 0.00 0.2 0.5 The risk-free rate is 3%. Calculate the following. d) Cox (Rm, RFTLQ) e) Write an equation of the security market line (this will be an equation showing E(r) and beta relation). f) What is the required rate of return (from CAPM) for the FTLQ Company? How does this compare with its expected return (from part (C) above)
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