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The CFO of MediSearch plc believes that investing into a project which will develop a new drug for fighting the flu virus, promises a long-term
The CFO of MediSearch plc believes that investing into a project which will develop a new drug for fighting the flu virus, promises a long-term annual return of 10%. The expected return of the market index is RM = 8.9%, the volatility of the market index is M = 10.1%, and the risk-free asset earns Rf = 5.9%. The CFO has studied similar projects of other companies and believes that the covariance between the returns of this project and the returns of the market is P,M = 0.0066 (in decimal form).
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