1. Stock BLT has a beta of 1.5 and the market has an expected return of 11%. What is the risk premium on Stock BLT if the risk free rate is 5%?
2. Stock A had an expected return of 20% and Stock B has an expected return of 10%. If you have $150,000, how much should you invest in Stock A if you want your portfolio to return 17%?
3. Mr. Sikes must pay you $10,000 a year in perpetuity with the first payment due today. If you discount the annual cash flow at 12% interest, what is the present value of these cash flows?