Stock has a required return of 12 the risk-free rate is 35, Ask an Expert

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Stock has a required return of 12%; the risk-free rate is 3.5%; and the market risk premium is 6%. What is the stock's beta? Round to two decimal places.

If the market risk premium increased to 7%, what would happen to the stock's required rate of return? Assume the risk-free rate and the beta remain unchanged.

A) 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.

B) 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.

C) 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.

D) 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.

E) 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.

What will the new stock's required rate of return will be %. Round to two decimal places.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91601885

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