I agree with all the above posted answers. To clarify for anyone confused, this assignment is based on the CAPM model. The basic formula for CAPM is the following:
Expected return on Y - Risk free rate = Beta of Y x (Expected market return - Risk free rate)
We are given that the risk free rate is .10 and the expected market return is .18 which brings us to the following formula:
Expected return on Y - .10 = Beta of Y x (.18 - .10)
Now all we need to do for each part is fill in the variable "expected return on Y" or the varible "Beta of Y" and solve for the other variable.
A) Given: Beta of equity = 1.5 Solve: Expected return on equity = .22 (22%)
B) Given: Return on debt capital = .12 Solve: Beta of debt capital = .25
C) Here we do a weighted average of the returns on debt and returns on equity. Since we are told that they are equally weighted, we have 1/2(.12) + 1/2(.22) = .17 (17%)
D) Given: Return on assets = .17 (from part C) Solve: Beta of assets = .875
I hope this helps!