《《Investment 8th Chap009》.docVIP

CHAPTER 9: THE CAPITAL ASSET PRICING MODEL PROBLEM SETS 1. E(rP) = rf + ? P [E(rM ) – rf ] 18 = 6 + ? P(14 – 6) ( ? P = 12/8 = 1.5 2. If the security’s correlation coefficient with the market portfolio doubles (with all other variables such as variances unchanged), then beta, and therefore the risk premium, will also double. The current risk premium is: 14 – 6 = 8% The new risk premium would be 16%, and the new discount rate for the security would be: 16 + 6 = 22% If the stock pays a constant perpetual dividend, then we know from the original data that the dividend (D) must satisfy the equati