Question

Consider the following information regarding a new investment that a company intends to undertake:. State of...

Consider the following information regarding a new investment that a company intends to undertake:.
State of the Economy
Probability
Market Return
Investment Return
Expansion
0.30
40%
60%
Normal
0.50
10%
25%
Recession
0.20
-15%
-40%
a). Compute the variance and standard deviation of each
b). Compute the correlation between the market the investment return(s)
c). Compute the beta of the investment
d). Assuming the risk free rate is 5% p.a. Compute the required rate return and advice if the investment is worth undertaken.
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