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    Calculatin of a stock's beta and required rate of return

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    A stock has a required return of 11%; the risk-free rate is 7%; and the market risk premium 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 the risk-free rate and the beta remain unchanged.

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    Solution Summary

    The solution is a step-by-step calculation of the stock's beta and the stock's required rate of return. MS Word document contains 130 words with detailed explanation of the effect of market risk premium on a stock's required rate of return. This step-by-step calculation provides students with a clear perspective of a stock's required rate of return.