3. Prepare the following problems in Excel and ensure the formulas are present in the appropriate cells:

Suppose that the risk free rate is 5% and that the market risk premium is 7%. What is the required return on (1) the market, (2) a stock with a beta of 1.0, and (3) a stock with a beta of 1.7? Assume that the risk free rate is 5% and that the market risk premium is 7%.

Answer: rm= 12%; rsb=16.9%