1) Zelo, inc. Stock has beta of 1.5. The risk free rate of return is 5% and the market rate of return is 10%. What is the amount of the risk Premium on zelo Stock?
A) 5%
B) 10%
C) 7.5%
D) 12.5%
2) You want your portfolio beta to be 1.20. Currently, your portfolio consists of $100 ivnested in stock A with a beta of 1.4 and $300 in stock B with a beta of .6. You have another $400 to invest and want to divide it between an asset with a beta of 1.6 and a risk free asset. How much should you invest in the risk-free asset?
A) 320
B) 200
C) 0
D) 560
3) which of the following statements is incorrect convering the equity component of the WACC?
A) there is a tax sheild such as with debt.
B) Preferred equity has a separate component
C) market values should be used in the calculations
D) The value of retained earning is not included.
TIA and please explain or show work.