CAPM. The Treasury bill rate is $4\%,$ and the expected return on the market portfolio is $12\%.$ According to the capital asset pricing model: $($LO$12-2)$

a$.$ What is the risk premium on the market?

b$.$ What is the required return on an investment with a beta of $1\mathrm{.}5?$

c$.$ If an investment with a beta of $8$ offers an expected return of $9\mathrm{.}8\%,$ does it have a positive NPV$?$

d$.$ If the market expects a return of $11\mathrm{.}2\%$ from stock X$,$ what is its beta?

CAPM. We Do Bankruptcies is a law firm that specializes in providing advice to firms in financial distress. It prospers in recessions, when other firms are struggling. Consequently, its beta is negative, $-\mathrm{.}2.($LO$12-2)$

a$.$ If the interest rate on Treasury bills is $5\%$ and the expected return on the market portfolio is $15\%,$ what is the expected return on the shares of the law firm according to the CAPM?

b$.$ Suppose you invested $90\%$ of your wealth in the market portfolio and the remainder of your wealth in the shares in the law firm. What would be the beta of your portfolio?