7. Given a risk-free rate (77) of 6 percent and a market risk premium (m-1) of 8.2 percent, calculate the required rate of return on each of the following stocks, based on the betas given in Table 8.8: a. American Electric Power b. Citigroup c. General Mills d. Wynn Resorts TABLE 8.8 Betas for Selected Stocks Company Value Line Beta Company Value Line Beta Amazon.com 1.05 Hershey Foods 0.65 American Electric Power 0.70 Honeywell 1.10 American States Water 0.70 IBM 0.85 Apple 0.95 Intel 1.00 Avis Budget group 1.50 Johnson & Johnson 0.75 Bank of America 1.45 JPMorgan Chase 1.20 Berkshire Hathaway 0.80 Kellogg 0.65 Boeing 1.05 Krispy Kreme 1.15 Cheesecake Factory 0.85 Microsoft 1.00 Citigroup 1.45 Nike 0.80 Coca-Cola 0.70 Southwest Airlines 1.05 Coca-Cola Bottling 0.65 Target 0.70 Duke Energy 0.65 United Continental Holdings 1.05 DuPont 1.10 Wal-Mart Stores 0.65 ExxonMobil 0.95 Whirlpool 1.30 General Electric 1.15 WEC Energy Group 0.70 General Mills 0.70 Wynn Resorts 1.35 Harley-Davidson 1.15 Yahoo! Inc. 1.05 ource: The Vue Line Investment Survey (New York Value Line Publishing, Inc, November 27, 2015). 2015 by Value Line Publishing, Inc. Used by permission. All rights reserved expected returns using security analyst data lead to somewhat lower equity risk estimates. The following discussion uses an average market risk premium of 8 For a security with average risk (, equal to 1.0), the risk premium should be market risk premium, or 8.2 percent. A security whose beta is 2.0, however, is to as the average security, so its risk premium should be twice the market risk pre