Hi

I need help with those problems!

a) AAA Incs stock has an expected return of 12.00%, a beta of 1.3, and is in equilibrium. If the risk-free rate is 5.00%, what is the market risk premium?

b) Wilson Corp believe the following probability distribution exists for its stock. What is the coefficient of variation on the company's stock?

State of the economy Probability of State occurring stocks expected Return

Boom 0.40 25%

Normal 0.50 15%

Recession 0.10 5%

c) Jane Corporations a stock had a required return of 11.75% last year, when the risk-free rate was 5.50% and the market risk premium was 4.75% then an increase in investor risk aversion caused the market risk premium to rise by 2% The risk-free rate and the firm's beta remain unchanged.

What is the company new required rate of return?

Hint: First calculate the beta, then find the required return.