1. You are considering options from two roofing contractors to fix your roof. Option A will last 12 years and cost $5, 300 whereas Option B will last 24 years and cost $8, 200. If you are plannng to take a home equity loan from your bank, at what interest rate would you be in different to the two options. (Hint: Goal Seek)
2. Firm 1 has a beta of 1.40. The risk free rate is 5%. The return on the market portfolio is 9%
a. What is Firm1 stock's required return?
b. What is the equity market risk premium?