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We Do Lawyers is a law firm that specializes in providing advice to firms in financial distress. It prospers in recessions when other firms are...
We Do Lawyers is a law firm that specializes in providing advice to firms in financial distress. It prospers in recessions when other firms are struggling. Consequently, its beta is negative, −0.2.
If the interest rate on Treasury bills is 4% and the expected return on the market portfolio is 19%, what is the expected return on the shares of the law firm according to the CAPM?
Suppose you invested 90% of your wealth in the market portfolio and the remainder of your wealth in the shares in the law firm. What would be the beta of your portfolio?
