ate or return of this bond (10 pts) Answers Exercise 6 The prices per share of three companies now and one year ago are: Number of Price one Company Price now shares year ago Oustanding L 101 1876.5 million M 102 274 9.5 million 276 142 5 million An index is composed of stocks L, M, and S. Calculate the return on then index if 1) The index is equally weighted (10 pts) Answers 2) The index is value weighted (10 pts) Answer= 3) The index is price weighted (10 pts) Answers SEE ===== See Exercise 7 Two portfolios K and G follow the models below perfectly R(K) = 0.0307 +1.52F R(G) = 0.0336 + 1.52F Where F is a macroeconomic factor. How can an arbitrageur take advantage of these two models? (5 pts) (A) Long K and short G (B) Short K and long G (C) There is no arbitarge SESSE Exercise 8 You are a consultant to a corporation that plans to buy a project whose net cashflows in millions of dollars are below Years from now Net cashflow -100 1 to infinity (perpetual) 13.6 The return on the market portfolio is 6.45% and the risk-free rate is 1.31% What is the highest possible beta estimate for the project before its NPV becomes negative? (10 pts) (A) 2.39 (B) 2.6 (C) 2.87 (D) 3.11