(answered) – 1 question, please help, should be very simple thank you for theDescriptionSolution downloadThe Question1 question, please help, should be very simple thank you for the helpProblem:Investors expect the market rate of return in the coming year to be 12%. The T-billrate is 4%. Changing Fortunes Industries stock has a beta of .5. The market value ofits outstanding equity is 100 million.What is your best guess currently as to the expected rate of return on ChangingFortunes stock? You believe that the stock is fairly priced.If the market return in the coming year actually turns out to be 10%, what is yourbest guess as to the rate of return that will be earned on Changing Fortunes stock?Suppose now that Changing Fortunes wins a major lawsuit during the year. Thesettlement is $5 million. Changing Fortunes stock return during the year turns out tobe 10%. What is your best guess as to the settlement the market previously expectedChanging Fortunes to receive from the lawsuit? (Continue to assume that the marketreturn in the year turned out to be 10%.) The magnitude of the settlement is theonly unexpected firm-specific event during the year.
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