please answer the following. 1. The Security Market Line (SMI) is based on a ris

Question

please answer the following. 1. The Security Market Line (SMI) is based on a risk free rate of 5% and a market rate of 11%. What will happen to the SMI it the forecast of inflation increases and investors become more risk averse? 2. Estimate the required return on a company under the following conditions: The average stock is returning 11%. Short term treasury bills yield 5%. The company's beta is 1.25. 3. Use the following information to calculate your company's expected return and standard deviation. State Probability Return Boom 20% 40% Normal 60% 15% Recession 20% (10%) 4. Use the following information to calculate your company's expected return. State Probability Return Boom 10% 40% Normal 60% 15% Recession 30% (20% a. 11% b. 13% c. 15% d. 7%

Explanation / Answer

a) 11%

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