The example in 11-8a: Does this example assume beta =1, or what? (In other words, interpret the assumption from the perspective of CAPM.) 11-8a Marginal Rates versus Historical Rates The required rates of return for a company's investors, whether they are new or old, are always marginal rates. For example, a stockholder might have invested in a company last year when the risk-free interest rate was 6% and the required return on equity was 12%%. If the risk-free rate subsequently falls and is now 4%, then the investor's required return on equity is now 10% (holding all else constant). This is the same required rate of return that a new equity holder would have, whether the new investor bought stock in the secondary market or through a new equity offering. In other words, whether the shareholders are already equity holders or are brand-new equity holders, they all have the same required rate of return, which is the current required rate of return on equity. The same reasoning applies for the firm's bondholders. All bondholders, whether old or new, have a required rate of return equal to today's yield on the firm's debt, which is based on current market conditions