Question

The CFO of MediSearch plc believes that investing into a project which will develop a new drug for fighting the flu virus, promises a long-term annual return of 10%. The expected return of the market index is RM = 14.4%, the volatility of the market index is OM = 12%, and the risk-free asset earns R = 4.8%. The CFO has studied similar projects of other companies and believes that the covariance between the returns of this project and the returns of the market is OPM = 0.0070 (in decimal form). What is the beta of the project? Enter your answer rounded to two decimal places. Number Section Attempt 1 of 1 Verify
Please be careful with roundings :) Thanks!

Answer 1

- Rau Beta - Coupon 0.0070 10.12) 0.49 Beta - Si Bete of stock = 0.49

- Page No.: Beta of Portfolio = (wa) (BA) + (Wa) (Bo) + ... + Wu) 1 B) Bets of oni-wan = 10 24) (1.13) + (0.221.55) + (0.24) (169) + (0.6) (1) + 1.20)(0) Betr = 1.12 Model, Eupected return as per CAPM ER - Rt + ß Rm- - - 37+ 1.12/118-37) Ennected Return = 11.96 % CAPM Model, ER= R + ß Rom - R1 - ER-Rr- ß (RM-R) As Question has provided ER-Rf is Expected Rish Remune So Expected rise Premium - B1RM - RJ SAMSUNG, 11.82=1011 Rm-R) ' Rom-f=11.70 % Nokis, 6.07 = Bl Rom R) Teling (Rm 4) from abou ep. 6.07 = ß Rao (11.2) Bets = 0.52 - Beteg latfolio - (0.8) (1.01) + 10.2010) Bete of Portfolio - (0.913