Problem 11 [4 pts] Emily DiDonato is thinking of buying Berkshire Hathaway Inc. (BRK-B) priced at...

Question

Question

Answer 1

Answer #1

Cost of equity = risk free Rate + beta*market risk premium

Let cost of equity be x

200(1+x) = 320

X = 0.6 or 60℅

Now, 5% +beta*10 = 60

Beta = 5.5

Hence, beta of Stock must be 5.5 for the prices to be consistent with CAPM

Answer 2

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