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Exam (elaborations)

FIN4801 Assignment 2 {COMPLETE ANSWERS } Due Date June 2026

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Question 1 (3 Marks) The market risk premium is the additional return that investors expect to earn from investing in the market portfolio rather than in a risk-free investment. Market Risk Premium = Market Return − Risk-Free Rate CAPM Formula: Cost of Equity = Risk-Free Rate + Beta × (Market Return − Risk-Free Rate) The highlighted section represents the market risk premium. Question 2 (2 Marks) Cost of Equity = Risk-Free Rate + Beta × Market Risk Premium = 5% + (1.5 × 6%) = 5% + 9% = 14% Answer: b. 14% Question 3 (2 Marks) Par Value = R10 000

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Institution
University Of South Africa (Unisa)
Course
Advanced Financial Management (FIN4801)

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, FIN4801 ASSIGNMENT 2 2026

DUE DATE: JUNE 2026



Question 1 (3 Marks)

The market risk premium is the additional return that investors expect to earn from
investing in the market portfolio rather than in a risk-free investment.

Market Risk Premium = Market Return − Risk-Free Rate

CAPM Formula:

Cost of Equity = Risk-Free Rate + Beta × (Market Return − Risk-Free Rate)

The highlighted section represents the market risk premium.




Question 2 (2 Marks)

Cost of Equity = Risk-Free Rate + Beta × Market Risk Premium

= 5% + (1.5 × 6%)

= 5% + 9%

= 14%

Answer: b. 14%




Question 3 (2 Marks)
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Course
Advanced Financial Management (FIN4801)

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