8.5) BETA AND REQUIRED RATE OF RETURN: A stock has a required return of 9%, the risk-free rate is 4.5%, and the market risk premium is 3%.

a.) What is the stock's beta?

b.) If the market risk premium is increased to 5%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged.

8.7) PORTFOLIO REQUIRED RETURN: Suppose you are the money manager of a $4.82 million investment fund. The fund consists of four stocks with the following investments and betas:

Stock a: investment = $460,000, beta = 1.50

Stock b: investment = $500,000, beta = (0.50)

Stock c: investment = $1,260,000, beta = 1.25

Stock d: investment = $ 2,600,000, beta = 0.75

*** If the market's required rate of return is 8% and the risk-free rate is 4%, what is the fund's required rate of return? ***

8.11) CAPM AND REQUIRED RETURN: Calculate the required rate of return for Mudd Enterprises assuming that investors expect a 3.6% rate of inflation in the future. The real risk-free rate of interest is 1.0%, and the market risk premium is 6.0%. Mudd has a beta of 1.5, and its realized rate of return has averaged 8.5% over the past 5 years.