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The risk-free rate is 4% and the market risk premium is 6%. For each of the following businesses, tell whether the expected rate of return
The risk-free rate is 4% and the market risk premium is 6%. For each of the following businesses, tell whether the expected rate of return should be 4%, more than 4%, or less than 4% : a) An automobile manufacturer b) A bad debt counseling service that does well when the economy does poorly c) a business that collects contributions from investors all over the country and invests them in lottery tickets. Its only risk is the risk that it will pick the wrong numbers. a) >4%; b) =4%;c)=4% a) >4%; b) 4%; b) 4%; b) =4%;c)
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