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pleaese answer it 1. Use the basic equation for the capital asset pricing model (CAPM) to work each of the following problems. a. Find the
pleaese answer it
1. Use the basic equation for the capital asset pricing model (CAPM) to work each of the following problems. a. Find the required return for an asset with a beta of .90 when the risk-free rate and market return are 8% and 12%, respectively. b.Find the risk-free rate for a firm with a required return of 15% and a beta of 1.25 when the market return is 14%. c. Find the market return for an asset with a required return of 16% and a beta of 1.10 when the risk-free rate is 9%. d.Find the beta for an asset with a required return of 15% when the risk-free rate and market return are 10% and 12.5%, respectively. 2. Mike is searching for a stock to include in his current stock portfolio. He is interested in Hi Tech Inc.; he has been impressed with the company's computer products and believes Hi-Tech is an innovative market player. However, Mike realizes that any time you consider a technology stock, risk is a major concern. The rule he follows is to include only securities with a coefficient of variation of returns below 0.90. Mike has obtained the following price information for the period 2009 through 2012. Hi-Tech stock, being growth-oriented, did not pay any dividends during these 4 years. Stock price a. Calculate the rate of return for each year, 2009 through 2012, for Hi-Tech stock. b. Assume that each year's return is equally probable, and calculate the average return over this time period. c. Calculate the standard deviation of returns over the past 4 years. (Hint: Treat these data as a sample.) d. Based on b and c determine the coefficient of variation of returns for the security. e. Given the calculation in d what should be Mike's decision regarding the inclusion of Hi-Tech stock in his portfolio Step by Step Solution
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