1. A stock has a beta of 2.2, the risk-free rate is 6 percent, and the expected return on the market is 12 percent. Using the CAPM, what would you expect the required rate of return on this stock to be? What is the market risk premium?
2. Your friend just bought a new car for $32,027. You expect that the value of the car will decline by 5 percent every year. What will be the value of the car in 11 years?
3. The house you want to buy costs $346 thousand. You plan to make a cash down payment of 10 percent, and borrow the rest in a 30 year mortgage at 3.8 percent APR. What will be the amount of your monthly mortgage payment?