0.18
0.25

14
50

10
25

0.22
0.1

12
60

11
30

Chapter 7
24) Uncle Fred recently died and left $325,000 to his 50-year-old favorite niece.She immediately spent $100,000 on a town home but decided to invest the balance for her retirement
at age 65. What rate of return must she earn on her investment over the next 15 years to permit her to withdraw $75,000 at the end of each year through age 80 if her funds earn 10 percent
annualy durning retirement?
26) A $1,000,000 state lottery prize is spread evenly over 10 years ($100,000 a year), or you may take a lump distribution of $654,000. If you can earn 7 %, which alternative is better?
Chapter 8
Stock A
Return
Probability of the return
Stock B
Probablility of the return
8) Two stocks, A and B, have beta coefficients of 0.8 and 1.4, respectively. If the expected return on the market is 10 percent and the risk-free rate is 5%, what is the risk
premium associated with each stock?
9)Stock A has a risk premium of 6.5 percent. If treasury bills yield 6.2 percent and the expected return on the market is 10.5 percent, what is the stock’s beta coefficient?
10) what is the required return on an investment with a beta of 1.3 if the risk-free rate is 4% and the return on the market is 11%? If the expected return on the investment
is 14%, what should you do?
Complete and submit solutions