Analyze the situations that arise in each of the problems and calculate the value or values required for each of these.

Problem 1:

Using the capital asset pricing model (CAPM) equation, determine the required return on the shares of the following companies, if the market return is 7.50% (Rm = 7.50%) and the return on the risk-free asset is 1.25% (RF = 1.25%). You must show all calculations

Problem 2:

If the return on the risk-free asset is 2.25% (RF = 2.25%) and the market return is 6.50% (Rm = 6.50%), how much is the beta of Bank of America, BAC, if it has had a return of 9.14%? You must show all calculations to receive points.

Problem 3:

Consider the assets in problem 1 with their respective beta coefficients to answer the following questions:

a.Which asset represents the greatest sensitivity to fluctuations or changes in market returns and why? What impact in terms of risk and return would this asset have if you added it to an investment portfolio in greater proportion than all other assets?

b. Which asset represents the least sensitive to fluctuations or changes in market returns and why? What impact in terms of risk and return would this asset have, if you added it to an investment portfolio in greater proportion than all other assets?

MBA 5050 6.2

\begin{tabular}{|c|c|} \hline Activo & Beta \\ \hline SKT & 0.65 \\ \hline COST & 0.90 \\ \hline SU & 1.42 \\ \hline AMZN & 1.57 \\ \hline V & 0.94 \\ \hline \end{tabular}