3. The following information is provided:

• Risk free rate, 2%
• Market risk premium, 5%
• Market beta of Stock A, .75

a. According to the capital asset pricing model (CAPM), the required return on this stock in decimal form rounded to the nearest 0.001 is?

b. In general, the market rate on a bond is expressed as which of the following:

-Nominal rate

-Annual effective rate (AER)

-Annual percentage rate (APR)

-None of the above