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ASAP Please Beta and CAPM Currently under consideration is a project with a beta, b, of 1.50. At this time, the risk-free rate of return,
ASAP Please
Beta and CAPM Currently under consideration is a project with a beta, b, of 1.50. At this time, the risk-free rate of return, RF, is 7%, and the return on the market portfolio of assets, km, is 10%. The project is actually expected to earn an annual rate of return of 11%. a. If the return on the market portfolio were to increase by 10%, what would you expect to happen to the project's required return? What if the market return were to decline by 10%? b. Use the capital asset pricing model (CAPM) to find the required return on this investment. c. On the basis of your calculation in part b, would you recommend this investment? Why or why not? d. Assume that as a result of investors becoming less risk-averse, the market return drops by 1% to 9%. What impact would this change have on your responses in parts b and cStep by Step Solution
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