1. Suppose K_rf = 5% , K_m= 10%, and K_e=14%.

Where K_{rf = rate of interest on risk-free bonds .}

K_{m = expected (required) rate of return on the market portfolio of stocks.}

K_{e = risk} adjusted after-tax cost of capital

a. Calculate stock As beta.

b. If stock As beta were 2.5, what would be As new required rate of return.