Assume that the risk-free rate of interest is 5% and the expected rate of return on the
Question:
Assume that the risk-free rate of interest is 5% and the expected rate of return on the market is 15%. I am buying a firm with an expected perpetual cash flow of $1,000 but am unsure of its risk. If I think the beta of the firm is 0.3, when in fact the beta is really 0.6, how much more will I offer for the firm than it is truly worth? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Assume that the risk-free rate of interest is 5% and the expected rate of return on the market is 15%. I am buying a firm with an expected perpetual cash flow of $1,000 but am unsure of its risk. If I think the beta of the firm is 0.3, when in fact the beta is really 0.6, how much more will I offer for the firm than it is truly worth? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
amount offered in excess=