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a. What is ex-rights price of a stock? Calculate the ex-rights price if the subscription price is $50, number of rights to buy 1 share

a. What is ex-rights price of a stock? Calculate the ex-rights price if the subscription price is $50, number of rights to buy 1 share are 20 and the value of a right is $0.30.

b. Use the following CAPM equation for a portfolio to answer the questions that follow: E(RP) = RF + P (RM RF) = 1 + 0.8 (5 1) = 4.2%

i) Comment on whether the portfolio is defensive or aggressive. Why?

ii) If the actual portfolio return is 6%, what is the portfolios alpha?

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