1. Given the facts of problem 3 above and that the common stock of the Rapid Rolling corporation has E(Rk) = 25% and k = 52% what is the systematic risk of the common stock? What is its unsystematic risk?
2. If the expected rate of return on the market portfolio is 14% and the risk free rate is 6% find the beta for a portfolio that has expected rate of return of 10%. What assumptions concerning this portfolio and or market condition do you need to make to calculate the portfolio's beta? b. what percentage of this portfolio must an individual put into the market portfolio in order to achieve an expected return of 10%
3. You belief that the Kilimani company will be worth Kshs. 100 per share one year from now. How much are you willing to pay for one share today if the risk free rate is 8%, the expected rate of return on the market is 18% and the company's beta is 2.0?
4. Suppose that securities are priced as if they are traded in a two parameter economy. You have forecast the correlation coefficient between the rate of return on Knowlode Mutual Fund and the market portfolio at 0.8. Your forecast of the standard deviation of the rate of return is 0.25 for Knowlode and 0.20 for the market portfolio. How would you combine the Knowlode Fund and a riskless security to obtain a portfolio with beta of 1.6?