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1. The risk-free return is 4%. The S&P 500 portfolio (market) has a standard deviation of...

1. The risk-free return is 4%. The S&P 500 portfolio (market) has a standard deviation of 25% and a return of 12%. Soap LLC (SOL) has a standard deviation of 40% and a 75% correlation with the S&P 500. Estimate the beta for SOL and use it in the Capital Asset Pricing Model to estimate the return.

Unless stated otherwise, compounding is annual and payments occur at the end of the period.

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