Required Rate of Return
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Calculate the required rate of return for Mars Inc.'s stock. The Mars's beta
is 1.2, the rate on a T-bill is 4 percent, the rate on a long-term T-bond is 6
percent, the expected return on the market is 11.5 percent, the market has
averaged a 14 percent annual return over the last six years, and Mars has
averaged a 14.4 return over the last six years.
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Solution Summary
The solution explains how to calculate the required rate of return on a stock.
Solution Preview
You need to use the CAPM equation to get the answer
Required Rate of Return = Risk free rate + (Expected ...
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