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A stock has a required return of 9%, the risk-free rate is 4.5%, and the market risk premium is 2%. What is the stock's beta?
A stock has a required return of 9%, the risk-free rate is 4.5%, and the market risk premium is 2%.
- What is the stock's beta? Round your answer to two decimal places.
- If the market risk premium 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. Do not round intermediate calculations. Round your answer to two decimal places.
- If the stock's beta is greater than 1.0, then the change in required rate of return will be greater than the change in the market risk premium.
- If the stock's beta is less than 1.0, then the change in required rate of return will be greater than the change in the market risk premium.
- If the stock's beta is greater than 1.0, then the change in required rate of return will be less than the change in the market risk premium.
- If the stock's beta is equal to 1.0, then the change in required rate of return will be greater than the change in the market risk premium.
- If the stock's beta is equal to 1.0, then the change in required rate of return will be less than the change in the market risk premium.
-Select-?
C. Stock's required rate of return will be %.
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