Question
Here are data on two companies. The T-bill rate is 5.8% and the market risk premium is 7.4%. Company Glasses Co Contact Inc. E(r) 14%
Here are data on two companies. The T-bill rate is 5.8% and the market risk premium is 7.4%.
| Company | Glasses Co | Contact Inc. |
| E(r) | 14% | 13% |
| Std Dev | 17% | 19% |
| Beta | 1.7 | 1 |
What would be the fair return for each company, according to CAPM? Are they over, under, or fairly priced?
What is each firms alpha, and which is the best buy?
Please Show Work and Formulas Used!!!
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Passive Income Stacking Handbook How To Reach Financial Freedom Faster Regardless Of Your Age Or Situation
Authors: Mark Walters
1st Edition
0578530171, 978-0578530178
