1. The required rate of return for Stock X is 11 percent. The risk-free rate of return is 4 percent and that the required return on the market is 9 percent and the stock has a beta of 1.4.

Today, new information that indicates the market risk premium is 1 percent higher than previously estimate.

Based on this new information, what should be the required rate of return for Stock X?

2. Stock Z recently paid a $1.20 per share dividend, which is expected to grow at a constant rate equal to 4 percent forever. The stock has a beta coefficient equal to 0.8 and its current market price is $17.83 per share.

Currently, the risk-free rate of return is 2.5% and the market risk premium is 10%. Is this stock correctly priced?

*Please explain your answers clearly. Thank you!