You have chosen biology as your college major because you would like to be a medical doctor. However, you find that the probability of being accepted to medical school is about 5 percent. If you are accepted to medical school, then your starting salary when you graduate will be $279,000 per year. However, if you are not accepted, then you would choose to work in a zoo, where you will earn $44,000 per year. Without considering the additional years, you would spend in school if you study medicine or the time value of money.

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What is your expected starting salary? (Round answer to 2 decimal places, e.g. 15.25.)

Expected starting salary

$ 55750

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What is the standard deviation of that starting salary? (Round answer to 2 decimal places, e.g. 15.25.)

Standard deviation

$ ?

If the expected return on the market is 12 percent and the risk-free rate is 4 percent,

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What is the expected return for a stock with a beta equal to 1.70? (Round answer to 2 decimal places, e.g. 0.15.)

Expected return

17.60%

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What is the market risk premium? (Round answer to 2 decimal places, e.g. 0.15.)

Market risk premium

8%