Required rate of return
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Mikkelson Corporation's stock had a required return of 15.00% last year, when the risk-free rate was 5.50% and the market risk premium was 4.75%. Then an increase in investor risk aversion caused the market risk premium to rise by 2%. The risk-free rate and the firm's beta remain unchanged. What is the company's new required rate of return? (Hint: First calculate the beta, then find the required return.)
23.37%
21.28%
19.00%
20.14%
16.15%
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Solution Summary
The solution explains how to calculate the required rate of return after an increase in risk aversion
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