1. Awesome Burgers Incorporated has a beta of 0.8. The yield on a 10-year T-bond is 6%. The market risk premium is 5.5% and the return on an average stock in the market is 15%. What is the estimated cost of common equity using the CAPM formula?
2. How do airlines hedge their fuel price risk?
Hint: discuss various strategies such as call, put, forwards, futures
Discuss why they have to cross hedge using other derivative instruments such as crude oil and heating oil.