Problem 1:
Calculate the standard deviation of the expected dollar returns for Computer Company Inc., given the following distribution of returns:
Probability Return
0.2 $50
0.5 $20
0.3 -$15
Problem 2:
Computer Company Inc. has a beta coefficient of 0.7 and a required rate of return of 15 percent. The market risk premium is currently 5 percent. If the inflation premium increases by 2 percentage points, and Computer Company Inc. acquires new assets which increase its beta by 50 percent, what will be Computer Company's new required rate of return?