Required Rates of Return

kHT = 8.0% + (15.0% - 8.0%)(1.29)

= 8.0% + (7%)(1.29)

= 8.0% + 9.0% = 17.0%.

kM = 8.0% + (7%)(1.00) = 15.0%.

kUSR = 8.0% + (7%)(0.68) = 12.8%.

kT-bill = 8.0% + (7%)(0.00) = 8.0%.

kColl = 8.0% + (7%)(-0.86) = 2.0%.

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