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Part 1: Dallas Star Inc. 's stock has a 35% chance of producing a 10% return, and a 60% chance of producing a 15% return.
Part 1: Dallas Star Inc. 's stock has a 35% chance of producing a 10% return, and a 60% chance of producing a 15% return. What is the firm's expected rate of return? What is the firm's Standard Deviation? What is the firm's Coefficient of Variation?
Part 2: Calculate the required rate of return for Dallas Star Inc., assuming that (1) the nominal risk-free rate is 4.0%, (2) expected market return is 10% and (3) the firm has a beta of 1.2. (Hint: You need to find out market risk premium first.)
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