Question 7

1. The required rate of return for Mallwart is 12 percent. The risk-free rate is 4 percent and the market risk premium is 5 percent. Estimate the beta for the Mallwart stock. Now, assume that all other items remain the same but the risk-free rate rises to 6 percent. What will be the required rate of return on Mallwart stock after this change in the risk-free rate?
2. A. 12.37%
3. B. 11.09%
4. C. 9.42%
5. D. 13.26%
6. E. 14.00%
7. F. 10.78%