A Stock has a required return of 11%, the risk- free is 7%, and the market risk premium is 4%.

a. What is the stocks beta?

b. If the market risk premium increased to 6%, what would happen to the stocks required rate of return? What would it be? Assume that the risk free rate and the beta remain unchanged.

c. If investors aversion to risk increased, would the risk premium on a high-beta stock increase by more or less than that of a low-beta stock? Explain.