A stock has a required return of 11%, the risk-free rate is 7%, and the market risk premuim is 4%.
A. What is the stock's beta?
B. If the market risk premium increased to 6%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged.
required rate or return = Rf + Beta (Rm-Rf)
Rf= risk free rate
Rm= market ...
The solution calculates beta and rate of return for a stock.