Question 4 (8 marks)

The estimated betas for Newmont Mining, TerraNova and Dominion companies are 1.10, 0.50, and 2.10, respectively. The appropriate risk-free rate is 2.25% and equity risk premium varies between 3% and 5.5%. Calculate the range of required rates of return for three stocks using the CAPM. Explain which stock carries relatively higher risk.