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5) What is the expected return on the rm's assets at node 0 (r 11(3)]? The expected return on the market is TM (U) =

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5) What is the expected return on the rm's assets at node 0 (r 11(3)]? The expected return on the market is TM (U) = rM(D) = 15% at nodes U and D. The expected return on the market at node i] is "PM (ii) = 1[}%. The riskfree rate is r; = 3%. Place yourself at node U right after the coupon and dividend payments. This node is called U+. ti) What is the value of the rm's assets at that time {A[U+})? 7) What is the expected return on the rm's assets at that time [TA[U+)}? 8) What is the Beta on the rm's assets at that time ((340%))? Assume that the value of the bond at that time is B {17+} = 370. 9) Compute the expected return on the bond at that time [TB(U+)} IU) Compute the Beta of the bond at that time (53[U+)} 11) Compute the value of the stock at that time (S(U+)} 12) What is the Beta of the stock at that time (g(U+])? Reminder: Beta of a portfolio is a weighted average of the Betas. Place yourself at node D right after the coupon and dividend payments. This node is called 13+. 13) What is the value of the bond at that time (B(D+})? 14) What is the value of the stock at that time (S(D+))? Place yourself at time D. Assmne the Beta of the stock at that time is g (fl) = 2UU. 15) What is the expected return on the stock at that time {T5 (0):}? 15) What is the value of the stock at that time (3(0))? 17) What is the value of the bond at that time (B([}]}? 18) What is the expected return on the bond at that time (T3 ({1})? 19) Compute the Beta of the bond at that time (133 [0)]? 20) Compute the Beta of assets (13.40")

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