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Question 9 3 pts Brentwood Co.'s management would like to estimate investors' required rate of return on Brentwood's common stock using the CAPM. The current
Question 9 3 pts Brentwood Co.'s management would like to estimate investors' required rate of return on Brentwood's common stock using the CAPM. The current risk free rate is 2.0%, the overall market required return is 6.0%, and management estimates the beta coefficient appropriate for the company is 1.5. What is the estimate of investors' required rate of return on the company's stock using CAPM? HINT: YOU MUST CALCULATE THE MARKET RISK PREMIUM. 6.75% O 7.25% 8.00% 10.75% Question 10 4 pts The common stock of Company A has a beta coefficient of 2.0, and the common stock of Company B has a beta coefficient of 1.0. The risk free rate of return is 3.00% currently. The expected rate of return on the S&P 500 (a proxy for the average market expected return) Is 6.0%. By how much - what percentage - does Company A's required return exceed the required return of Company B's stock? You will need to calculate the required return for both Company A and Company B using the CAPM. 4.20% 6.30% 3.00% 9.00%
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