Security A has an expected rate of return of 6 percent, a standard deviation of expected returns of 30 percent, a correlation coefficient with the market of -0.25, and a beta of coefficient of -0.5. Security B has an expected return of 11 percent, a standard deviation of returns of 10 percent, a correlation with the market of 0.75 and a beta coefficient of 0.5. Which security is more risky? Why?

Calculate the required rate of return for Mercury Inc., assuming that investors expect a 5 percent rate of inflation in the future. The real risk-free rate is equal to 3 percent and the market risk premium is 5 percent. Mercury has a beta of 2.0.

The real risk-free rate of interest is 3 percent. The market expects that inflation will be 3 percent each year for the next 5 years, and then will average 5 percent a year thereafter. The maturity risk premium is estimated to be MRPt = 0.1(t - 1)%. What is the yield on a Treasury bond which matures in twelve years?

Assume that r* = 2.0%; the maturity risk premium is found as MRP = 0.1%(t - 1) where t = years to maturity; the default risk premium for corporate bonds is found as DRP = 0.05%(t - 1); the liquidity premium is 1.0 percent for corporate bonds only; and inflation is expected to be 3 percent, 4 percent, and 5 percent during the next three years and then 6 percent thereafter. Compute the expected interest rates for 10-year corporate bonds and 10-year Treasury bonds?