We Do Bankruptcies is a law firm that specializes in providing advice to firms in financial distress. It prospers in recessions, when other firms
We Do Bankruptcies is a law firm that specializes in providing advice to firms in financial distress. It prospers in recessions, when other firms are struggling. Consequently, its beta is negative, -0.2. a. If the interest rate on Treasury bills is 5% and the expected return on the market portfolio is 15%, what is the expected return on the shares of the law firm according to the CAPM? Note: Enter your answer as a whole percent. b. Suppose you invested 90% of your wealth in the market portfolio and the remainder of your wealth in the shares in the law firm. What would be the beta of your portfolio? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. a. Expected return b. Beta %
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