1. Please explain the risk vs. expected rate of return tradeoff, the security market line, and determination of beta on this basis. Include explanation of all the constituents namely, security market line, risk measure, expected rate of return, risk-free rate of return, and market rate of return. Include hypothetical examples for better clarity.
2. Explain the weighted average cost of capital (WACC) and its significance and include hypothetical examples for better clarity.