Answered step by step
Verified Expert Solution
Question
1 Approved Answer
stock has a required return of 8%, the risk-free rate is 3.5%, and the market risk premium is 2%. a. What is the stock's beta?
stock has a required return of 8%, the risk-free rate is 3.5%, and the market risk premium is 2%. a. What is the stock's beta? Round your answer to two decimal places. b. If the market risk premium increased to 3%, 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. I. 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. II. 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. III. 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. IV. 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. V. 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 Stock's required rate of return will be %
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started