Response to the following questions:
1. Suppose you want to earn a rate of 8% after inflation. If you expect inflation to be 4% during the next year, what nominal rate of return would you require on your investment?
2. If the expected return on a risk-free asset is 5% and the market premium is 4%, what is the expected security return if the security's beta is:
a. 0.00?
b. 0.50?
c. 1.00?
d. 1.25?
e. 2.00?