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    Calculate Stock's Beta: Required Rate of Return & Risk Free Rate

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    A stock has a required return of 11 percent; the risk free rate is 7 percent; and the market risk premium is 4 percent.

    What is the stock's beta?

    If the market risk premium increased to 6 percent what would happen to the stock's required rate of return? Assume the risk free rate and the beta remained unchanged.

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    Solution Summary

    This solution calculates the stock's beta given the required rate of return and risk free rate.